The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, introduces significant reforms aimed at stimulating economic growth, supporting the middle class, and ensuring fiscal stability. The budget proposes crucial measures to provide relief to individuals and small businesses, focusing on tax rationalization and compliance simplification.
The Finance Bill 2025 includes amendments to tax and corporate laws, emphasizing:
Personal Income Tax Reforms, particularly for the middle class.
Rationalization of TDS/TCS provisions.
Encouragement of voluntary compliance.
Reduction in compliance burden.
Enhancing Ease of Doing Business.
Incentives for employment and investment.
Additionally, the new Income-tax Bill 2025 is set to be released next week. Below are the key tax and corporate law changes proposed in the budget.
Income Tax Act, 1961 - Key Proposals
1. Changes in Personal Income Tax
No changes in tax rates for those opting for the old tax regime.
No changes in surcharge and education cess rates.
New tax regime (Section 115BAC) tax slabs revised as follows:
Total Income (₹) New Tax Rate (Assessment Year 2026-27) Upto ₹4,00,000 Nil ₹4,00,001 - ₹8,00,000 5% ₹8,00,001 - ₹12,00,000 10% ₹12,00,001 - ₹16,00,000 15% ₹16,00,001 - ₹20,00,000 20% ₹20,00,001 - ₹24,00,000 25% Above ₹24,00,000 30% Section 87A tax rebate limit increased from ₹7 lakh to ₹12 lakh.
Maximum rebate under Section 87A increased from ₹25,000 to ₹60,000.
Income from capital gains under Sections 111A and 112 excluded from 87A rebate calculation.
2. TDS/TCS Changes
TDS rate under Section 194LBC reduced from 25%/30% to 10%.
Increase in TDS threshold limits for various provisions:
Section Nature of Income Current Threshold (₹) Proposed Threshold (₹) 193 Interest on securities Nil 10,000 194 Dividend 5,000 10,000 194A Interest on deposits 40,000 50,000 194B Lottery, Betting 10,000 aggregate 10,000 per transaction 194D Insurance Commission 15,000 20,000 194H Commission & Brokerage 15,000 20,000 194-I Rent 2,40,000 (Yearly) 50,000 per month 194J Professional Fees 30,000 50,000 194LA Compensation for land acquisition 2,50,000 5,00,000 TCS on sale of goods (Section 206C(1H)) withdrawn from April 1, 2025.
Higher TDS/TCS for non-filers (Section 206AB & 206CCA) omitted.
TCS rate on timber reduced from 2.5% to 2%.
Liberalised Remittance Scheme (LRS) TCS threshold increased from ₹7 lakh to ₹10 lakh.
No TCS on foreign education loans (under Section 80E(3)(b)).
3. Salary and House Property Income
Perquisite limits for employer-provided benefits (like gas, electricity, medical travel) to be revised.
Self-occupied house property valuation remains nil for up to two properties.
4. Income Tax Return (ITR) Updates
Deadline to file updated tax returns extended from 24 months to 48 months.
New penalties for late tax filings:
Updated Return Filing Timeline Additional Tax Payable Within 12 months 25% of tax + interest 12-24 months 50% of tax + interest 24-36 months 60% of tax + interest 36-48 months 70% of tax + interest
5. Capital Gains Taxation
ULIPs (Unit Linked Insurance Plans) now classified as capital assets if Section 10(10D) exemption does not apply.
ULIPs included in the definition of Equity-Oriented Funds.
Long-term capital gains tax for non-residents revised to 12.5% (from 10%).
Securities held by investment funds will now be treated as capital assets.
6. Deductions and Incentives
NPS Vatsalya Scheme introduced, allowing tax benefits on contributions made for minors:
Deduction of ₹50,000 under Section 80CCD(1B).
Taxable on withdrawal, except in case of death.
Partial withdrawals up to 25% exempt.
Final Thoughts
The Union Budget 2025 brings strategic tax reforms focused on reducing the compliance burden, encouraging voluntary tax compliance, and providing relief to middle-class taxpayers. The revisions in TDS/TCS thresholds, tax slabs, and rebates will have a positive impact on disposable incomes and investment decisions. Businesses and individual taxpayers should analyze these changes carefully to plan their finances efficiently.
This budget signifies a progressive shift towards simplification and economic growth, ensuring better ease of doing business and tax compliance in the years ahead
