Budget 2025: Major Tax Reforms Announced!

No Income Tax on Annual Income Up to ₹12.75 Lakh!

The government has raised the Section 87A rebate limit from ₹7 lakh to ₹12 lakh, providing major tax relief to the middle class. Salaried individuals can also claim a ₹75,000 standard deduction, making incomes up to ₹12.75 lakh tax-free.

  • Income Tax Slab (New Regime)Tax Rate
  • ₹0 - ₹4 lakh Nil
  • ₹4 - ₹8 lakh 5%
  • ₹8 - ₹12 lakh 10%
  • ₹12 - ₹16 lakh 15%
  • ₹16 - ₹20 lakh 20%
  • ₹20 - ₹24 lakh 25%
  • ₹24 lakh & above 30%
    More tax benefits for homeowners:
  • Individuals can claim two self-occupied properties as NIL taxable income.
    • Extended time for filing updated returns (ITR-U):
  • Taxpayers now get 4 years (instead of 2) to update their Income Tax Returns.

    TDS & TCS Reforms for Simplified Compliance

    1. TDS (Tax Deducted at Source) Reforms:
  • TDS on rent limit increased from ₹2.4 lakh to ₹6 lakh, reducing compliance for small landlords.
  • Threshold for senior citizens’ interest income doubled from ₹50,000 to ₹1 lakh.
    • 2. TCS (Tax Collected at Source) Changes:
  • TCS on foreign remittances raised from ₹7 lakh to ₹10 lakh, allowing higher limits before tax deductions apply.

    Senior Citizens’ Tax Benefits & Savings Exemptions

    1. Higher tax-free interest income:
  • Senior citizens can now earn up to ₹1 lakh interest tax-free (previously ₹50,000).
    • 2. National Savings Scheme (NSS) Withdrawals Exempted:
  • NSS account withdrawals made after August 29, 2024, will be tax-exempt.
  • NPS Vatsalya accounts to get the same tax benefits as regular NPS accounts.

    Startups & Non-Resident Taxation Benefits

    1. Boost for Indian Startups:
  • The tax holiday for eligible startups extended by 5 years (applicable to startups incorporated before 1st April 2030).
    • 2. Presumptive Taxation for Non-Residents in Electronics Manufacturing:
  • Non-residents providing services to Indian electronics companies will now benefit from a presumptive tax regime.
  • Safe Harbour Rules introduced for non-residents storing electronic components for manufacturing.
To delve into the main highlights of Union Budget 2025Click here

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Pre-Budget Expected Amendments 2025

Our experts at Tax2Win have outlined key recommendations for the upcoming Budget 2025 to provide relief to taxpayers and foster economic progress. Here's what we're looking forward to:

Enhance Personal Tax Relief

  • Raise the Basic Exemption Limit: Address inflation by increasing the exemption limit under the income tax regime. A rise to ₹4 lakh is essential, while many taxpayers hope for a ₹10 lakh limit.
  • Reduce Tax Rates: Ease the financial burden and increase disposable income for individuals.

Clarify EV Perquisite Valuation and Cryptocurrency Taxation

  • Simplify EV Perquisites:Provide clear valuation guidelines for electric vehicle benefits to reduce compliance complexities for employers and employees.
  • Comprehensive Crypto Taxation:Introduce rules to allow offsetting crypto losses against gains for fair and transparent taxation of virtual digital assets (VDAs).

Reform House Property Loss Set-Off and Home Loan Benefits

  • Uncap Property Loss Set-Off:Make real estate investment more attractive by removing caps on setting off house property losses.
  • Home Loan Benefits in New Tax Regime: Encourage homeownership with benefits under the new tax regime, even at reduced levels compared to the old regime.

Address Housing Rent Allowance (HRA) Parity

  • HRA for Tier-2 Cities: Include cities like Hyderabad, Pune, and Bengaluru in the 50% HRA exemption category for fair treatment of taxpayers in high-cost urban centers.

Revise Provident Fund (PF) Tax Compliance

  • Defer TDS on PF Interest: Defer tax deduction on interest exceeding ₹2.5 lakh until withdrawal to improve taxpayer cash flow.

Extend ESOP Tax Benefits

  • Allow tax deferment for all employers, enabling employees to pay taxes on ESOPs only at the time of sale, aligning tax liabilities with financial gains.

Support Senior Citizens

  • Higher Basic Exemption Limit: Provide senior citizens with a more generous exemption limit to ease financial pressures.
  • Additional Health Deductions: Introduce deductions for healthcare costs beyond Section 80D to offset rising medical expenses.

Encourage Housing Investment

  • Increase Home Loan Deduction: Raise the Section 24(b) deduction limit from ₹2 lakh to ₹3 lakh to reflect rising property prices and interest burdens.

Boost Savings with NPS and Section 80C Enhancements

  • Higher NPS Deductions: Increase the additional NPS deduction limit from ₹50,000 to ₹1,00,000 and make withdrawals fully tax-free (EEE treatment).
  • Increase Section 80C Limit: Raise the deduction limit to ₹2.5 lakh to offer taxpayers more flexibility in optimizing their savings.

Incentivize Long-Term Investments

  • LTCG Tax Relief on Equities: Exempt long-term capital gains on equities or introduce benefits for holding securities beyond two years to rebuild investor confidence.

Increase Standard Deduction

  • Double the standard deduction from ₹50,000 to ₹1,00,000 to offset inflation and hybrid work-related expenses, with higher limits for armed forces personnel.

Reduce TDS for Professionals

  • Lower TDS on professional services from 10% to 5% to enhance cash flow and simplify compliance for professionals.

FAQs on Budget 2025

Q- When the budget will be presented in 2025?

The Union Budget for the fiscal year 2025-26 will be presented on February 1, 2025, by Finance Minister Nirmala Sitharaman.

Q- Who prepares the Union budget?

The budget is a detailed planning allocation of economic resources of the country for the upcoming fiscal year. Since it has a major impact on all sectors, the budget is prepared in harmony with different ministries. Recommendations from all the ministries are submitted to the finance ministry for their demands, which are further analyzed by the budget division.

Q- Who will introduce Budget 2025-26?

Budget 2025 will be introduced by the Hon’ble Finance Minister Nirmala Sitharaman before the Parliament of India.

Q- What is the Interim Budget?

The interim Budget is presented by the ruling government when elections are due in the fiscal year. Hence, the ruling government cannot make strategic decisions for the complete fiscal year in which it might or might not have the ruling powers. The last Interim Budget was presented in 2024 by current Finance Minister Smt. Nirmala Sitharaman.

What are the 5 benefits of having a Union budget?
  • Economic Stability: The Union Budget sets the financial agenda for the government, helping ensure the country’s economic stability by managing national revenues, expenditures, and debt.
  • Resource Allocation: It facilitates the effective allocation of resources to various sectors like healthcare, education, infrastructure, and defense, ensuring balanced development across regions.
  • Policy Implementation: The budget outlines the government’s priorities for the upcoming fiscal year, including tax policies, subsidies, and reforms, which drive the nation’s development agenda.
  • Investor Confidence: A well-presented Union Budget can boost investor confidence by providing clarity on government spending, fiscal policies, and growth strategies, which can stimulate economic growth and investment.
  • Social Welfare:The budget plays a key role in ensuring funding for social welfare programs like poverty alleviation, healthcare, and employment generation, helping improve the standard of living for the general population.

Q- Is the Union Budget released every year?

Yes, the Union Budget is released every year. It is typically presented by the Finance Minister of India in the Parliament on February 1. The budget outlines the government's financial plan for the upcoming fiscal year (April to March), detailing how the government's revenue will be raised and how it will be spent across various sectors.