Salaried employees may see higher take-home pay in the coming years as the Government of India considers major reforms under the proposed new income tax framework. These proposed changes are aimed at simplifying tax laws, reducing tax liability, and improving monthly cash flow by lowering TDS deductions.
While these measures are still at the proposal and discussion stage and await official approval, experts believe they could significantly benefit middle-income earners once implemented.
Below are five key proposed changes that could increase your take-home salary in the future:
1. Income up to ₹12 Lakh May Become Tax-Free Under the New Tax Regime
The rebate under Section 87A is proposed to be increased to ₹60,000. If approved, individuals earning up to ₹12 lakh annually under the new tax regime may not have to pay any income tax. This could result in annual savings ranging from ₹25,000 to ₹50,000 for middle-income taxpayers.
2. Expansion of Metro Cities for HRA Benefits (Old Tax Regime)
In a major relief for employees opting for the old tax regime, it is proposed that cities such as Bengaluru, Hyderabad, Pune, and Ahmedabad may be added to the metro category for HRA purposes. This would allow employees in these cities to claim HRA exemption up to 50% of basic salary, instead of the current 40%, thereby reducing taxable income.
3. Significant Increase in Children’s Education and Hostel Allowances
To account for rising education costs, proposals suggest increasing the children’s education allowance from ₹100 per month to ₹3,000 per month per child. Hostel allowance may also be raised from ₹300 to ₹9,000 per month. If implemented, this could lead to tax savings of over ₹50,000 annually for employees with children.
4. Higher Standard Deduction for Salaried Employees
The standard deduction, which currently stands at ₹75,000 under the new tax regime, may be increased to ₹1,00,000. This would directly reduce taxable income by an additional ₹25,000 for salaried individuals.
5. Higher Tax-Free Limit on Office Gifts
The tax-free limit on employer-provided gifts and vouchers is proposed to be raised from ₹5,000 to ₹15,000 per year. This would provide relief on festive bonuses, rewards, and gift cards received from employers.
What Could This Mean for Your Salary?
If these proposals are approved and implemented, experts estimate that the average salaried employee could see an increase in annual take-home pay ranging from ₹25,000 to ₹80,000. The actual benefit would depend on salary structure, tax regime selection, and applicable exemptions.
Important Note
These changes are proposals and expectations, not yet law. Any real impact on salary or TDS will occur only after official announcements, legislative approval, and notification by tax authorities.
