As finance minister Nirmala Sitharaman gets ready to announce her maiden budget on July 5, expectations among Indian citizens are already sky high.

Most of the demands that have been proposed in the run-up to July 5 pertain to lower taxation, especially those belonging to the middle-income group.

They have demanded the government to either increase the overall tax exemption threshold or introduce tax breaks to reduce strain on their household expenses.

While the government may not honour all of their requests, it is likely to take certain steps to ease taxation on the middle-income group. Economists indicate that not many changes will be introduced in taxation given the present economic situation.

However, tax experts said the government may introduce some sops to boost demand and speed up economic growth. Having said that, here are a few likely income tax changes that could be announced by Nirmala Sitharaman:

Income tax exemption limit

Since a full tax rebate up to Rs 5 lakh was introduced under Section 87A in the interim budget, it is unlikely that there will any other alteration in the exemption. But citizens and many industry bodies want the government to increase the tax exemption threshold from the existing Rs 2.5 lakh to at least Rs 3 lakh.

However, people should note that such a move is unlikely given the economic delinquencies that have to be tackled by the government.

Many are hopeful that the government would make amends to increase the limit but it would lead to a reduction in the current tax base as more people will be exempted from paying income tax.

Considering that the government wants to increase the country's tax base, such a move is highly unlikely.

Higher income tax deduction

People exempting a hike in exemption limit may end up being disappointed but the government may cheer them up by introducing higher deductions under several sections of the Income Tax Act.

The income tax deduction allowed under Section 80(C), currently at Rs 1.5 lakh, could be raised to Rs 2 lakh or above.

This will allow people to save more tax on investments made under Section 80(C) of the Income Tax Act. Investments towards PPF, EPF, NSC, fixed deposits and NPS qualify for deduction under Section 80(C).

More tax benefits towards healthcare

There are high chances that the government will increase deduction under tax saving instruments available in healthcare. Industry bodies have already asked the government to increase tax saving under Section 80(D) of the Income Tax Act.

The limit could be increased from the current Rs 25,000, applicable to people aged below 60 years, under Section 80(D). The concession could also be raised under Section 80(D) for people above the age of 60 years. The current limit of exemption for people above 60 years is Rs 50,000.

Higher deduction on home loans

Since the real-estate sector has been affected negatively due to a demand slowdown, the government could offer more tax benefits to buyers and provide a much-needed boost to the sector.

According to the latest details, people can claim a maximum deduction up to Rs 2 lakh under Section 24B of the Income Tax Act.

According to economists, the government could increase this limit further to incentivise buying housing properties for boosting demand in the sector. A person can claim this deduction from the year in which the construction of the house is completed.

Tax-free bonds may witness a comeback

One of the key goals of the government in the budget will be to boost infrastructure projects as it holds key to boosting job growth and pushing up demand.

In such a scenario, it would not be a surprise if tax-free bonds witness a comeback.

The instrument will help the government raise capital through government entities for infrastructure projects. Such bonds are called 'tax-free' as the interest earned on them is not taxable.

While these bonds have a long period of maturity--ranging from 10 years or more--they are safe than many other options available in the market.