Union Budget 2025: Key Highlights on Income Tax Amendments

The Union Budget 2025 has introduced several key amendments aimed at boosting economic growth, easing taxation, and supporting various sectors. This budget focuses on tax rationalization, fiscal discipline, voluntary compliance, and enhanced benefits for middle-class taxpayers, senior citizens, startups, and rural development.

Let us explore the significant amendments and their impact on different stakeholders.

Revised Personal Income Tax Structure

The budget has revised the new tax regime slabs, making it more attractive for taxpayers:

  • Up to ₹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%

Impact:

  • Increased tax savings for lower and middle-income groups.
  • Encourages more taxpayers to shift to the new tax regime.

Tax Benefits for Middle-Class & Senior Citizens

Key Highlights:

  • Rebate under Section 87A increased from ₹7 lakh to ₹12 lakh.
  • Self-Occupied Property: Taxpayers can now claim 2 properties instead of 1.
  • Higher Deduction for Senior Citizens: Deduction limit doubled from ₹50,000 to ₹1,00,000.

Impact:

  • Higher disposable income
  • Relief for senior citizens, encouraging financial stability.

TDS/TCS Rationalization

Key Changes:

  • TDS on Rent: Threshold increased from ₹2.40 lakh to ₹6 lakh per year.
  • TDS on Insurance Commission: Reduced from 5% to 2%.
  • Interest Income (Banks/Post Office): Exemption limit raised from ₹40,000 to ₹50,000 (₹1,00,000 for senior citizens).
  • Dividend Income Exemption: Increased from ₹5,000 to ₹10,000.
  • Professional Fees (Section 194J): Threshold raised from ₹30,000 to ₹50,000.

Impact:

  • Reduces tax burden on small investors and professionals.
  • Encourages compliance with rationalized thresholds.

Boost for Startups & Innovation

  • Startup tax benefits extended for five more years.
  • Increased funding for digital literacy and cybersecurity.
  • Capital Expenditure: ₹11.2 trillion allocated for infrastructure projects.

      Impact:

  • Encourages entrepreneurship and job creation.
  • Strengthens digital security and infrastructure development.

National Pension Scheme (NPS) Enhancements

  • Parents/Guardians contributing to NPS Vatsalya Account for minors can claim deductions under Section 80CCD.
  • Presumptive Taxation: Now applicable to NRIs (earlier only for residents).

      Impact:

  • Encourages long-term savings and financial security.
  • Expands tax benefits for NRIs, promoting overseas investments.

LRS TCS (Liberalized Remittance Scheme) Limits

  • Enhanced to ₹10 lakh.
  • No TCS on loans taken for education.

      Impact:

  • Provides greater flexibility for overseas investments and education financing.

Conclusion

The Union Budget 2025 presents a balanced approach to economic growth, social welfare, and fiscal discipline. With significant tax reliefs, support for startups, agriculture incentives, and infrastructure growth, this budget aims to create a prosperous and financially inclusive India.

Taxpayers, investors, and businesses should leverage the new amendments to optimize tax planning and take advantage of growth opportunities.