Finance Minister Nirmala Sitharaman presented her 8th Union Budget 2025 in the Parliament on February 1. Providing a big relief to the middle class, the FM exempted annual income of up to Rs 12 lakh (amounting to Rs 12.75 lakh for salaried taxpayers, including standard deduction) from income tax and also made changes in the tax slabs as part of her reformist Budget. The new structure will significantly enhance the accessibility of the middle class by leaving them with more disposable income, thereby enhancing household consumption, savings, and investment under the new tax regime.
New Tax Slab:
IncomeTax Rate0-4 LakhNil4-8 Lakh5%8-12 Lakh10%12-16 Lakh15%16-20 Lakh20%20-24 Lakh25%Above 24 Lakh30%
The Finance Minister also announced higher tax exemptions, TDS relief and startup boost in the budget. Key highlights are as follows:
New Income Tax Bill: The Finance Minister announced that the new Income Tax Bill will be introduced next week. The new Income Tax Bill will be clear, direct and simple to understand for both the taxpayers and tax authorities.
Time Limit to update tax returns: The Budget extended the time limit to update the tax return to 4 years. The time limit for the previous year was 2 years. This move will allow taxpayers an extended timeline to scrutinize their returns and file an updated return so that any tax or penal implication arising out of return filed already can be avoided.
TDS Threshold: The number of TDS rates and thresholds will be reduced to streamline compliance. The threshold for Tax Collected at Source (TCS) on remittances under the Liberalized Remittance Scheme (LRS) has been increased from Rs 7 lakh to Rs 10 lakh.
TDS for Senior Citizens: The limit for tax deduction on interest for senior citizens has been doubled from Rs 50,000/- to Rs 1,00,000/-.
Annual limit for TDS on rent: The annual limit for TDS on rent has been raised from Rs 2.4 lakh to Rs 6 lakh, benefitting small taxpayers receiving smaller payments.
Fiscal deficit: The Budget emphasized the government’s commitment to managing the fiscal deficit in a way that keeps the Central government debt on a declining trajectory relative to GDP. The revised total expenditure estimate stands at Rs 47.16 lakh crore, with capital expenditure accounting for Rs 10.1 lakh crore. The fiscal deficit for the year is now projected at 4.8% of GDP.
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