With Budget 2025 on the horizon, taxpayers are eagerly awaiting potential changes to the new tax regime, particularly regarding popular deductions like Section 80C and House Rent Allowance (HRA). While the old tax regime offers multiple exemptions, the new regime—introduced in 2020—focuses on simplified tax slabs but lacks key tax-saving benefits.
One of the biggest expectations is an increase in the standard deduction, which currently stands at ₹75,000 in the new tax regime. Experts believe this should be raised to ₹1.2 lakh, considering rising inflation, transport, and medical expenses. Santhosh Sivaraj, Partner at BDO India, suggests this would align with the actual costs incurred by salaried taxpayers.
Another key demand is the inclusion of Section 80C, which currently allows deductions of up to ₹1.5 lakh for investments in PPF, LIC, and EPF under the old tax regime. Experts argue that the new tax regime should not only include this benefit but also increase the deduction limit to ₹2 lakh to encourage long-term savings.
Similarly, the demand for HRA exemptions has gained traction, particularly for taxpayers residing in high-rent cities like Bengaluru, Gurugram, Hyderabad, and Pune. Many experts believe that expanding HRA benefits in the new tax regime will provide significant relief to salaried individuals. Additionally, industry leaders have suggested raising the deduction for housing loan interest from ₹2 lakh to ₹3 lakh, making homeownership more affordable.
With taxpayers hoping for relief and clarity, all eyes are on Finance Minister Nirmala Sitharaman’s Budget 2025 speech on February 1, which will determine whether these expectations turn into reality.
