Union Budget 2025: Key Tax Changes That Could Impact Your Finances
What’s New in Income Tax Slabs for
2025-26?
In the Union
Budget 2025, the government introduced significant changes to the income tax
regime. This includes a higher tax exemption threshold, which has been eagerly
awaited by middle-class taxpayers.
Income Tax Exemption up to Rs. 12
Lakhs
The most
exciting news is that the government has now exempted individuals earning up to
Rs. 12 lakh annually (under the new tax regime) from paying any income tax.
This is a huge relief compared to the previous exemption limit of Rs. 7 lakh.
For taxpayers
earning between Rs. 12 lakh and Rs. 24 lakh, the revised tax slabs offer
reduced tax burdens. The new, proposed regime aims to simplify tax filing and
compliance.
Income Tax Regimes: Which One is Right
for You?
India’s tax
system offers two primary tax regimes: the Old Tax Regime and the New Tax
Regime. Let’s break down the differences and determine which regime benefits
you the most.
Old Tax Regime:
The old tax
regime offers various exemptions, deductions, and rebates. For example,
taxpayers can still claim deductions under sections like 80C (for investments),
80D (for health insurance), and 80CCD (for NPS).
However, this
regime requires more paperwork and can be a hassle for those who prefer
simplicity. As of Budget 2025, there are still some updates, such as allowing
tax treatment of NPS Vatsalya accounts.
New Tax Regime:
The new tax
regime is designed to be simpler and more transparent. While it doesn't offer
exemptions, it allows for a more straightforward approach to tax filing. Key
updates include:
1. Income of up to Rs. 12 lakh is now
completely tax-free.
2. Revised tax slabs with a 30% tax rate
triggering only above Rs. 24 lakh (previously Rs. 15 lakh).
This regime
works best for taxpayers who do not need to claim deductions and prefer a
hassle-free filing process.
Key Changes That Could Affect Your Tax
Liability
1.TDS and TCS Updates
As of April
1, 2025, there are important changes to TDS and TCS regulations, especially for
non-PAN holders. Previously, non-PAN holders were charged higher TDS rates
under Section 206CC. This provision is being removed, making compliance easier
for taxpayers without a PAN.
Additionally,
there is a change in the Tax Collected at Source (TCS) rate for remittances.
The threshold for TCS on international remittances has been raised from Rs. 7
lakh to Rs. 10 lakh.
2. No More Tax on Two Self-Occupied
Homes
Good news for
homeowners! The new budget allows individuals to declare the annual value of up
to two self-occupied properties as nil, exempting them from paying tax on
notional rental income. This is a relief for those who own multiple properties
and are required to declare rental income for tax purposes.
3. Deduction for NPS Contributions
Under the Old Regime
Under the old
tax regime, the government has proposed a new tax treatment for NPS Vatsalya
accounts. These will now be treated the same as regular NPS accounts under
Section 80CCD, offering an additional deduction of up to Rs. 50,000.
What’s in Store for Gig Workers in
Budget 2025?
Gig economy
workers have long struggled for recognition and benefits. The 2025 budget
introduces several changes aimed at improving their social security.
Gig Worker Identity Cards and
Healthcare
The
government will provide gig workers with identity cards through the e-Shram
portal and extend PM Jan Arogya Yojana healthcare benefits. These changes aim
to recognize gig workers as part of the official employment ecosystem,
providing them with greater job security and healthcare access.
Tax Relief for Property Buyers
For those
looking to buy property, Budget 2025 brings relief in the form of new tax
exemptions. The government now allows tax benefits on two self-occupied homes
rather than just one. This is especially beneficial for people who own homes in
different cities for work, personal reasons, or investments.
Additionally,
the budget has introduced a higher exemption limit for rental income. Small
landlords who receive rental income below Rs. 6 lakh annually will benefit from
simplified TDS rules.
How Will Budget 2025 Affect Your
Savings and Investments?
The revised
tax slabs and the introduction of tax-free income up to Rs. 12 lakh may
influence how individuals approach savings and investment.
Does Budget 2025 Discourage Savings?
The new tax
regime might discourage savings-focused behavior, especially for individuals
who previously claimed deductions. However, the increased disposable income due
to the higher exemption limit may encourage spending, which is expected to
boost domestic consumption.
Conclusion: Is Budget 2025 Truly
Taxpayer-Friendly?
The Union
Budget 2025-26 presents several taxpayer-friendly measures, particularly for
the middle class. With an increased tax exemption limit, revised tax slabs, and
initiatives supporting gig workers and property buyers, the budget promises
relief for millions.
While some
taxpayers may prefer the old regime due to its deductions and exemptions,
others may find the new regime a simpler and more efficient option. Either way,
Budget 2025 is a step in the right direction toward reducing tax burdens and simplifying
compliance.
Frequently Asked Questions (FAQ)
1. Will my income tax liability be
zero if I earn up to Rs. 12 lakh?
Yes, under
the proposed new tax regime, individuals with annual incomes up to Rs. 12 lakh
will not have to pay any income tax.
2. What happens if I don't have a PAN?
Starting from
April 1, 2025, the higher TDS rates for non-PAN holders will be omitted.
However, you may still be subject to other compliance requirements.
3. Are gig workers eligible for any
tax benefits in Budget 2025?
Yes, gig
workers will receive identity cards and access to healthcare benefits under the
PM Jan Arogya Yojana, as announced in the budget.