Many aspiring spirits among taxpayers were most likely raised beyond expectations regarding the Budget 2025 with sound reverberations from the FM. The murmur surrounding the phase-out of the older tax framework saw substantial changes in the new tax regime, where these changes were given credence. Considerable tax relief was therefore extended to taxpayers; for example, the basic exemption limit from ₹3 lakhs to ₹ four lakhs represents immediate relief for lower-income earners, while more importantly, the top income slab has been raised from ₹15 lakhs to ₹24 lakhs together with a restructuring of tax gratifications and slabs to include an introduced 25% rate incentive.
In another move, the income limit for the 87A tax rebate benefiting resident taxpayers was increased from ₹7 lakhs to ₹12 lakhs. Moreover, the limit set against special entries like capital gain or lottery winning receipts, which confused the interpretation in the earlier claims, is now excluded from this calculation to ensure a more reasonable approach to tax determination.
These revisions benefit taxpayers across income levels under the new regime. For instance, someone earning up to ₹12 lakhs can save up to ₹80,000 annually (excluding cess), while an individual with ₹18 lakhs in income could see savings of up to ₹1.1 lakhs (excluding cess). Higher earners subject to surcharges may enjoy even greater reductions, making the new structure appealing.
Specific provisions have been simplified to streamline tax rules. Previously, vacant properties could be deemed self-occupied (SOP) with no income for up to two properties, provided the taxpayer couldn’t reside there due to work and lived in a rented space. The condition tying residency to employment or business has now been removed, easing the qualification process without altering the core benefit.
The Budget also enhances the NPS Vatsalya Scheme, launched in September 2024, which allows parents to open National Pension System (NPS) accounts for minors. Upon adulthood, the account is transferred to the child with accumulated funds. A new provision extends the ₹50,000 deduction under Section 80CCD (previously limited to the old regime) to contributions under this scheme. Furthermore, partial withdrawals up to 25% for specific purposes are tax-free, adding flexibility for families.
Addressing a long-standing issue, the National Savings Scheme (NSS), where deposits before April 1, 1992, qualified for deductions but withdrawals were taxable, has seen relief. Following a notification on August 29, 2024, halting interest on NSS balances, depositors pushed for withdrawals. Responding to their concerns, the FM has exempted withdrawals made after that date, providing much-needed financial ease to affected individuals.
The government has balanced fiscal responsibility with a “Trust first, Scrutinize later” philosophy by extending the deadline for filing updated returns by two additional years. Taxpayers can file with extra payments of 60% or 70%, encouraging voluntary compliance and boosting revenue collection.
Clarity has also been introduced to tax redemption proceeds from un-exempted Unit Linked Insurance Plans (ULIPs). These are now uniformly classified as equity-oriented funds, aligning with earlier definitions for some un-exempted ULIPs, reducing confusion and ensuring consistent taxation.
Tax Collected at Source (TCS) and Tax Deducted at Source (TDS) thresholds have been adjusted for simplicity. For instance, remittances under the Liberalized Remittance Scheme have risen from ₹7 lakhs to ₹10 lakhs, with education loans exempting TCS entirely. Interest income thresholds for senior citizens have doubled from ₹50,000 to ₹1 lakh, improving their cash flow. However, higher TDS rates will persist for those with invalid or no PAN, though the elevated rates for non-filers of income returns are proposed to be dropped, easing business operations and compliance burdens.
The FM has committed to presenting the long-awaited New Income Tax Bill next week, promising more straightforward rules and less litigation. Budget 2025 aims to instil confidence and positivity among taxpayers through these progressive measures, supporting India’s economic growth while addressing individual financial needs.