Union Budget 2025: The Union Budget is a crucial document that gives an insight into the government's financial plans for the upcoming fiscal year. This year, the Union Budget, which will be the second full budget of Modi 3.0, is scheduled to be presented by Finance Minister Nirmala Sitharaman on February 1, 2025, at 11 am, although official confirmation is still pending. With the Budget around the corner, taxpayers are anticipating potential changes that could impact their financial planning. Here are some expected tax deduction terms you should know ahead of the budget.
Notably, a tax deduction is an expense or expenditure that can be subtracted from an individual's or business's total income, resulting in a lower taxable income. This, in turn, reduces the amount of income tax owed to the government.
Section 80D deductions:
Section 80D of the Income Tax Act, of 1961, provides tax deductions for individuals and Hindu Undivided Families (HUFs) on medical insurance premiums and health-related expenses. It is presently capped at Rs 25,000 for individuals and Rs 50,000 for senior citizens. Experts predict that the limit might be increased to Rs 50,000 for individuals and Rs 1,00,000 for senior citizens to promote better health coverage.
Home loan interest deductions:
Home Loan Interest Tax Deduction is a tax benefit provided to individuals who have taken a home loan to purchase or construct a residential property. This deduction is allowed under Section 24(b) of the Income Tax Act, 1961. The government might increase the limit under Section 24(b) for a deduction on interest on home loans from Rs 2 lakhs to Rs 3 lakhs, to encourage homeownership and boost the real estate sector.
Section 80C limit revision:
Section 80C of the Income Tax Act, 1961, allows individuals and Hindu Undivided Families (HUFs) to claim deductions on certain investments and expenses, thereby reducing their taxable income. The deduction limit under Section 80C, which has remained unchanged since 2014, might be raised from Rs 1.5 lakhs to Rs 2 lakhs to encourage investments in tax-saving instruments like PPF, ELSS, and NSC.
Tax Deducted at Source (TDS)
Tax Deducted at Source (TDS) is a tax collection mechanism in India, where a portion of the payment made to a recipient is deducted and deposited with the government as tax. This deduction is made at the time of payment, hence the name "Tax Deducted at Source."
Corporate tax rate extension
Corporate tax rate extension refers to the reduced corporate tax rates introduced by the Indian government to incentivize businesses. There are two main reduced tax rates: 22% and 15%. These reduced tax rates aim to boost economic growth, encourage investment, and create jobs. The 15% concessional corporate tax rate for new manufacturing units might be extended beyond March 2024 to support the Make-in-India initiatives.
Research and Development incentives:
R&D (Research and Development) incentives are tax deductions or credits provided to businesses that invest in research and development activities. These incentives aim to encourage innovation, entrepreneurship, and economic growth.
