A Budget for Middle Class?
The Union Budget for the fiscal year 2025-26, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, introduced significant reforms in individual taxation aimed at benefiting the middle class and stimulating economic growth.
Key Highlights:
Revised Income Tax Slabs under the New Tax Regime:
Income up to ?4 lakh: No tax
?4 lakh to ?8 lakh: 5%
?8 lakh to ?12 lakh: 10%
?12 lakh to ?16 lakh: 15%
?16 lakh to ?20 lakh: 20%
?20 lakh to ?24 lakh: 25%
Above ?24 lakh: 30%
Notably, individuals with an annual income up to ?12 lakh are given tax rebate under this new structure. Additionally, salaried individuals can avail a standard deduction of ?75,000, effectively making income up to ?12.75 lakh tax-free.
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Enhancements in Tax Deducted at Source (TDS) and Tax Collected at Source (TCS)
Thresholds: Interest Income for Senior Citizens: The TDS exemption limit has been increased from ?50,000 to ?1 lakh per annum.
Rental Income: The TDS threshold has been raised from ?2.4 lakh per annum to ?50,000 per month or part of the month.
Overseas Remittances: The TCS threshold under the Liberalised Remittance Scheme has been elevated from ?7 lakh to ?10 lakh. Furthermore, remittances for educational purposes funded through specified loans are exempt from TCS.
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Extended Timeline for Filing Updated Tax Returns: Taxpayers now have up to four years from the end of the relevant assessment year to file updated returns, providing additional time to rectify any omissions or errors.
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Tax Treatment of Self-Occupied Properties: Individuals can now claim the annual value of up to two self-occupied properties as nil, without any specific conditions, offering greater flexibility for homeowners.
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Introduction of a New Income Tax Bill: The government plans to introduce a new Income Tax Bill aimed at simplifying the tax code, reducing compliance burdens, and enhancing clarity for taxpayers and administrators alike.
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These measures reflect the government's commitment to easing the tax burden on individuals, particularly the middle class, and fostering a more straightforward and taxpayer-friendly environment.
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