10 income tax changes in Budget 2025 every taxpayer should be aware of

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The Finance Minister has introduced progressive tax reforms that are set to increase disposable income, fostering both financial stability and consumer spending.

10 income tax changes in Budget 2025 every taxpayer should be aware of

The basic exemption limit under the new tax regime has been raised from Rs 3 lakh to Rs 4 lakh. (Image: Freepik)

The Union Budget 2025-26 has presented a strategic roadmap for accelerated economic growth while offering much-needed relief to the middle class. The Finance Minister has introduced progressive tax reforms that are set to increase disposable income, fostering both financial stability and consumer spending.

“With the revised income tax slabs and reduced tax rates, a rough estimate suggests that taxpayers could save up to Rs 10,000 per month, depending on their income bracket. This significant boost in savings will enable individuals to better manage existing loans and enhance their loan eligibility, making homeownership and other large investments more accessible,” said Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution Pvt Ltd.

The ripple effect of increased disposable income will be felt across the retail loan industry, as more individuals will have the financial confidence to take on new loans, whether for housing, automobiles, or personal financing needs. This policy move is expected to strengthen the banking and NBFC sector, further driving economic momentum.

Commenting on the budget impact on taxpayers, Divya Baweja, Partner, Deloitte India, said the 2025 Budget reinforces the government’s dedication to provide tax relief to the middle class. The government has continually eased the tax burden on the middle class, recognizing their essential role in nation-building.

“In Budget 2025, the Finance Minister has proposed ‘NIL’ taxes for taxpayers earning up to Rs 12 lakh (excluding income subjected to special rate such as capital gains), thereby resulting in a saving of Rs 83,200 when compared with the current tax rates, under the new tax regime. This is a welcome move which has already brought a lot of cheer to the middle-income class,” he added.

Here’s a look at 10 income tax changes in the Union Budget 2025 every taxpayer should be aware of:

Revision in Income Tax Slabs and Rates: In an effort to boost consumption and put more money in the hands of people, the slabs and rates for income tax have been revised significantly. The budget has increased the amount of rebate available under the New Tax Regime for individuals having taxable income up to Rs 12 lakh.

“Such taxpayer group is not required to pay any taxes and hence this will lead to tax saving of Rs 80,000. If you are a salaried individual with total income of Rs 12.75 lakh, due to the availability of standard deduction of Rs 75,000, you are not required to pay any taxes,” said Preeti Sharma, Partner, Tax & Regulatory Services, BDO India.

2. Increase in Basic Exemption Limit: The basic exemption limit under the new tax regime has been raised from Rs 3 lakh to Rs 4 lakh.

3. Proposal for new Income Tax Bill: The Budget proposed to introduce the new income tax bill this week. The Finance Minister in her budget speech announced that the new income tax bill will carry forward the spirit of “Nyaya”. The new bill will be clear and direct in text with close to half of the present law, in terms of both chapters and words. It will be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation.

4. TDS/TCS rationalization for easing difficulties: The FM has rationalized Tax Deduction at Source (TDS) by reducing the number of rates and thresholds above which TDS is deducted. The limit for tax deduction on interest for senior citizens has been doubled from the present Rs 50,000 to Rs 1 lakh, while the annual limit of Rs 2.40 lakh for TDS on rent has been increased to Rs 6 lakh. The threshold to collect tax at source (TCS) on remittances under RBI’s Liberalized Remittance Scheme (LRS) has been increased from Rs 7 lakh to Rs 10 lakh. However, the provisions of the higher TDS deduction will apply only in non-PAN cases.

Commneting on this, Vimal Nadar, Senior Director & Head, Research at Colliers India, said, “The Budget has increased the annual limit of Rs 2.4 lakh for TDS on rent to Rs 6 lakh in case of renting for non-residential purposes. This will reduce the tax burden on smaller taxpayers who are into the business of renting out smaller premises for their living and thus enjoy higher disposable income. Also, this aims to bring in operational efficiencies as the number of TDS transactions will reduce. The Budget also now allows the benefit of two self-occupied properties without any condition, thus reducing compliance burden on the taxpayers.”

Anil Talreja, Partner, Deloitte India, said,Rationalizing TDS and TCS was a long ask from the Industry and the Finance Minister has now addressed. These measures will improve ease of doing business in India. A loud message to the investor community to come and invest in India.”

5. Provisions related to annual value of self-occupied property simplified: The budget has proposed to amend section 23(2) of the I-T Act to simplify and provide that the annual value of the property consisting of a house or any part thereof shall be taken as NIL (available for 2 houses), if the owner occupies it for his own residence or cannot occupy it due to any other reason.

Kaushal Agarwal, Co-Founder & Director of The Guardians Real Estate Advisory, said, “The Union Budget 2025 brings a significant relief for homeowners by allowing tax benefits on two self-occupied properties instead of just one. Earlier, individuals had to pay tax on the notional rental income of a second home, adding to their financial burden. This change simplifies tax compliance and recognises the need for housing flexibility, especially for families with homes in different cities for work, investment, or personal reasons. By reducing tax liabilities, this move is expected to boost homeownership and drive real estate demand, particularly in Tier 2 and Tier 3 cities”.

6. Extending the time limit to file updated return: The time limit to file updated return is proposed to be extended from 24 months to 48 months from the end of relevant AY.

7. Increase in the limits for the purpose of calculating perquisites: It is proposed to amend section 17 of the I-T Act for prescribing rules for increasing the monetary limit for (a) amenities and benefits received by employees to be exempt from being treated as perquisites and (b) expenditure incurred by the employer for travel outside India on the medical treatment of employee or his family member for not been treated as a perquisite.

8. Reporting obligations for transactions in crypto-assets: According to the Union Budget 2025 analysis by RSM India, it has been proposed to insert 285BAA of the I-T Act for providing reporting obligations in the hands of reporting entity (as may be prescribed) to furnish information in respect of transaction in crypto assets in a statement, for such period, within such time, in such form and manner and to such income tax authority, as may be prescribed. It also outlines procedures for rectifying defects in the submitted statements, the consequences of failing to submit within the specified time, and the process for correcting inaccuracies in the information provided.

9. Deduction under section 80CCD of the I-T Act available for contributions made to NPS Vatsalya: It is proposed to extend the benefit available (maximum Rs 50,000) under section 80CCD(1B) of the I-T Act to the contributions made under NPS Vatsalya Scheme, which was officially launched on 18 September 2024. The deduction shall be allowed on the total income of parent / guardian in respect of amount paid or deposited in the account of minor child.

10. Exemption to withdrawals by Individuals from National Savings Scheme from taxation: It is proposed to amend section 80CCA of the I-T Act to provide exemption on the withdrawals made by individuals from NSS deposits on or after 29 August 2024 for which deduction under section 80CCA was already allowed on or before 1 April 1992.

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