The much-anticipated Union Budget for 2025-26, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, marks a pivotal step in India’s economic journey. This budget lays a strong foundation for all-inclusive growth, focusing on empowering the poor, youth, farmers, and women. It aims to bolster long-term sustainable growth by implementing key reforms in taxation, infrastructure, agriculture, and digitalisation.
A significant aspect of this budget is the transformative changes in both direct and indirect taxes. These changes are designed to alleviate the tax burden on individuals and streamline the ease of doing business. The detailed breakdown of these tax changes provides insights into their impact on citizens and businesses alike.
Direct Taxes
Personal Income Tax
- No Personal Income Tax Up to ₹12 Lakh: Individuals with an annual income of up to ₹12 lakh are exempt from paying personal income tax under the new regime. For salaried taxpayers, this limit is ₹12.75 lakh due to the standard deduction of ₹75,000.
- Revised Tax Rate Structure:
- ₹0-4 lakh: Nil
- ₹4-8 lakh: 5%
- ₹8-12 lakh: 10%
- ₹12-16 lakh: 15%
- ₹16-20 lakh: 20%
- ₹20-24 lakh: 25%
- Above ₹24 lakh: 30%
- The new structure aims to reduce taxes for the middle class, boosting household consumption, savings, and investment.
TDS/TCS Rationalization
- Simplified TDS Rates: Reduction in the number of rates and thresholds for Tax Deduction at Source (TDS).
- Senior Citizens: The limit for tax deduction on interest for senior citizens has doubled from ₹50,000 to ₹1 lakh.
- Rent: The annual limit for TDS on rent has increased from ₹2.4 lakh to ₹6 lakh.
- Liberalized Remittance Scheme (LRS): The threshold to collect tax at source (TCS) on remittances has increased from ₹7 lakh to ₹10 lakh.
- Decriminalization: Cases of delay in payment of TCS up to the due date of filing the statement have been decriminalized.
Reducing Compliance Burden
- Charitable Trusts: The period of registration for small charitable trusts/institutions has increased from 5 years to 10 years.
- Self-Occupied Properties: The benefit of claiming the annual value of self-occupied properties as nil will be extended for two such properties.
Indirect Taxes
Customs Tariff Structure
- Rationalization: Seven tariff rates removed, with only eight remaining, including the 'zero' rate. Appropriate cess will be applied to maintain effective duty incidence.
- Relief on Drugs/Medicines: 36 lifesaving drugs and medicines fully exempted from Basic Customs Duty (BCD), and six lifesaving medicines to attract a concessional customs duty of 5%.
Support to Domestic Manufacturing
- Critical Minerals: Exemptions on various critical minerals to support domestic manufacturing and value addition.
- Textiles: Exemptions on two more types of shuttle-less looms and revisions in BCD rates for knitted fabrics.
- Electronic Goods: Adjustments in BCD for various components to support electronics manufacturing.
- Lithium-Ion Battery: Exemptions on capital goods for EV and mobile phone battery manufacturing.
- Shipping Sector: Extended exemptions on BCD for raw materials for ship manufacturing.
Export Promotion
- Handicraft Goods: Extended time for export, and additional items added to the duty-free list.
- Leather Sector: Exemptions on Wet Blue leather and Crust leather.
- Marine Products: Reductions in BCD for specific fish products to support manufacturing and export.
- Railway Goods MROs: Similar benefits as aircraft and ships MROs in terms of import and export of repair items.
Trade Facilitation
- Provisional Assessment: Fixed time-limit of two years for finalizing provisional assessments.
- Voluntary Compliance: New provisions for importers/exporters to declare material facts and pay duty with interest but without penalty.
- Extended Time for End Use: Extended time limit for the end-use of imported inputs and quarterly statement filing instead of monthly.
Frequently Asked Questions
What is cheaper in Budget 2025?
Several lifesaving drugs and medicines are fully exempted from Basic Customs Duty (BCD), while six others attract a concessional customs duty of 5%. Exemptions and reductions in BCD for critical minerals, textiles, electronic goods, lithium-ion battery components, and certain marine products also make these items cheaper.
What is the new income tax bill in 2025?
The new income tax bill introduces a revised tax rate structure with zero tax on incomes up to ₹12 lakh. For salaried taxpayers, the limit is ₹12.75 lakh due to the standard deduction of ₹75,000. The bill aims to simplify tax regulations, reduce litigation, and make the text clear and direct for taxpayers and tax administration.
The Budget 2025 is poised to bring positive changes for taxpayers and businesses alike, promoting economic growth and ease of compliance.
