The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, introduces significant reforms in India’s direct tax structure, primarily benefiting the middle class and aiming to stimulate economic growth. Below are the key highlights:
Revised Income Tax Slabs
The budget proposes a substantial increase in the tax exemption threshold. Individuals earning up to ₹12 lakh annually will now be exempt from paying income tax. For salaried taxpayers, the standard deduction has been increased to ₹75,000, effectively making income up to ₹12.75 lakh tax-free.
The updated tax slabs under the new regime are as follows:
| Income Range (₹) | Tax Rate |
|---|---|
| Up to 4,00,000 | Nil |
| 4,00,001 to 8,00,000 | 5% |
| 8,00,001 to 12,00,000 | 10% |
| 12,00,001 to 16,00,000 | 15% |
| 16,00,001 to 20,00,000 | 20% |
| 20,00,001 to 24,00,000 | 25% |
| Above 24,00,000 | 30% |
Rebate under Section 87A
The maximum rebate available has been increased from ₹25,000 to ₹60,000 for resident individuals opting for new tax regime with an annual income of up to ₹12 lakh.
TDS and TCS rationalisation measures
The Union Budget 2025 introduces several measures to rationalize Tax Deducted at Source (TDS) and Tax Collected at Source (TCS), aiming to simplify tax compliance and provide relief to taxpayers. Key changes include:
Reduced TDS/TCS Rates
To ease tax compliance and lessen the burden on taxpayers, the government has proposed a reduction in TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) rates across various categories. The revised rates are as follows:
| Section | Description | Current TDS/TCS Rate | Proposed TDS/TCS Rate |
|---|---|---|---|
| 194LBC | Income from securitization trust | 25% (for Individuals/HUF), 30% (others) | 10% |
| 206C(1) | TCS on timber/forest produce | 2.5% | 2% |
| 206C(1G) | TCS on LRS remittance for education (financed by loan) | 0.5% (beyond ₹7 lakh) | Nil |
Higher TDS/TCS Exemption Thresholds
To reduce the compliance burden and limit the number of taxpayers subject to TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) provisions, the government has significantly raised the exemption thresholds for various sections. The updated limits are as follows:
| Section | Description | Current Threshold (₹) | Revised Threshold (₹) |
|---|---|---|---|
| 193 | Interest on securities | Nil | ₹10,000 |
| 194A | Interest (excluding securities) | ₹50,000 (senior citizens), ₹40,000 (others – banks, co-ops, post offices), ₹5,000 (others) | ₹1,00,000 (senior citizens), ₹50,000 (others – banks, co-ops, post offices), ₹10,000 (others) |
| 194 | Dividend income for individuals | ₹5,000 | ₹10,000 |
| 194K | Income from mutual funds/specified companies | ₹5,000 | ₹10,000 |
| 194B | Lottery, crossword puzzle winnings | Cumulative ₹10,000 per financial year | ₹10,000 per transaction |
| 194D | Insurance commission | ₹15,000 | ₹20,000 |
| 194G | Lottery ticket commission | ₹15,000 | ₹20,000 |
| 194H | Brokerage/commission income | ₹15,000 | ₹20,000 |
| 194I | Rental income | ₹2,40,000 (annually) | ₹50,000 (monthly) |
| 194J | Professional/technical fees | ₹30,000 | ₹50,000 |
| 194LA | Compensation on land acquisition | ₹2,50,000 | ₹5,00,000 |
| 206C(1G) | LRS remittance, overseas tour package | ₹7,00,000 | ₹10,00,000 |
These increased thresholds aim to simplify tax administration and reduce unnecessary deductions for smaller transactions, ensuring a smoother tax compliance process.
Changes in TCS (Tax Collected at Source)
Liberalized Remittance Scheme (LRS): The threshold for TCS on LRS remittances has been increased from ₹7 lakh to ₹10 lakh per financial year.
Education Loans: TCS has been removed on remittances for education purposes when funded through loans from specified financial institutions.
- Removal of TCS on Sale of Goods: To ease compliance, TCS will no longer apply to transactions involving the sale of goods.
- Following the decriminalization of delays in TDS payments, delays in TCS payments have now also been decriminalized, reducing the compliance burden on taxpayers.
These measures are designed to simplify tax processes, reduce the compliance burden, and provide relief to various taxpayer segments.
Extended Time Limit for Filing Updated Returns
The deadline for filing updated returns has been increased from 24 months to 48 months from the end of the relevant assessment year. This extension gives taxpayers more time to correct or update their returns without significant penalties. The tax payable will depend on the timing of the updated return:
- 60% of the additional tax and interest if filed within 24-36 months.
- 70% of the additional tax and interest if filed within 36-48 months.
Simplification for Charitable Trusts and Institutions
- The validity of registration for charitable trusts and institutions has been extended from 5 years to 10 years, reducing compliance requirements.
- The definition of “specified violations” for cancellation of registration will be rationalized to exempt minor defaults, such as incomplete applications.
Tax Relief for Business Trusts
Business trusts, including Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), will now be taxed at the maximum marginal rate under Section 112A, simplifying tax treatment.
Removal of Higher TDS/TCS for Non-Filers
Sections 206AB and 206CCA, which impose higher TDS and TCS rates on non-filers, will be omitted, reducing compliance complexity for businesses and individuals.
Tax Benefit for Self-Occupied Properties
The annual value of up to two self-occupied properties will now be considered as nil, simplifying tax benefits for homeowners. Previously, this benefit was available only under specific conditions.
Reporting Requirement for Crypto-Assets
The government will mandate prescribed entities to report transactions involving crypto-assets. Additionally, the definition of “virtual digital assets” will be updated for better clarity and compliance.
Rationalization of “Forest Produce” Definition
The definition of “forest produce” under Section 206C(1) will be refined to remove ambiguities. TCS will now apply only on forest produce obtained under a forest lease, simplifying tax collection in these cases.
Extension of Time Limit for Startup Tax Benefits (Section 80-IAC)
Tax benefits for eligible startups under Section 80-IAC will be extended for another five years, covering startups incorporated before April 1, 2030, to encourage entrepreneurship.
Increased Parity in Long-Term Capital Gains Tax
The taxation of long-term capital gains for non-residents (FIIs) will now be aligned with that of domestic investors, ensuring a fair tax structure for all.
All Services across Bharat
- Income tax
- GST
- Business registration
- Accounting
- Audit
- ROC filings
- Certificates
- Project report or CMA data
