Budget 2025: Key Highlights on Direct Taxes
1. New Tax Regime under Section 115BAC revised:
The new tax regime introduced in Budget 2025 under Section 115BAC has replaced the previous new tax regime. Individuals now have two options:
1. Revised New Tax Regime (Budget 2025 - Section 115BAC) – Default Regime
2. Old Tax Regime (which continues to exist in our tax laws)
The previous new tax regime is discontinued, meaning taxpayers must now either opt for the Old Regime or follow the revised New Tax Regime (Budget 2025).
2. Revised Tax Slabs under Section 115BAC (Budget 2025)
• The new tax rates applicable under Section 115BAC are:
|
Income Slab (₹) |
Tax Rate (%) |
|
Up to ₹4,00,000 |
No Tax |
|
₹4,00,001 – ₹8,00,000 |
5% |
|
₹8,00,001 – ₹12,00,000 |
10% |
|
₹12,00,001 – ₹16,00,000 |
15% |
|
₹16,00,001 – ₹20,00,000 |
20% |
|
₹20,00,001 – ₹24,00,000 |
25% |
|
Above ₹24,00,000 |
30% |
• The existing tax rates applicable under Section 115BAC were:
|
Income Slab (₹) |
Tax Rate (%) |
|
Up to ₹3,00,000 |
No Tax |
|
₹3,00,001 – ₹7,00,000 |
5% |
|
₹7,00,001 – ₹10,00,000 |
10% |
|
₹10,00,001 – ₹12,00,000 |
15% |
|
₹12,00,001 – ₹15,00,000 |
20% |
|
Above ₹15,00,000 |
30% |
3. Tax Comparison - Budget 2025 New Regime vs. Previous New Regime:
|
Total Income |
Tax as per existing New Tax Regime |
Tax as per Budget 2025 New Tax Regime |
Benefit of Rate/Slab |
Rebate Benefit |
Total Benefit |
|
(1) |
(2) |
(3) |
(4) = (2-3) |
(5) |
(6) =(4+5) |
|
8,00,000 |
30,000 |
20,000 |
10,000 |
20,000 |
30,000 |
|
9,00,000 |
40,000 |
30,000 |
10,000 |
30,000 |
40,000 |
|
10,00,000 |
50,000 |
40,000 |
10,000 |
40,000 |
50,000 |
|
11,00,000 |
65,000 |
50,000 |
15,000 |
50,000 |
65,000 |
|
12,00,000 |
80,000 |
60,000 |
20,000 |
60,000 |
80,000 |
|
13,00,000 |
1,00,000 |
75,000 |
25,000 |
- |
25,000 |
|
14,00,000 |
1,20,000 |
90,000 |
30,000 |
- |
30,000 |
|
15,00,000 |
1,40,000 |
1,05,000 |
35,000 |
- |
35,000 |
|
16,00,000 |
1,70,000 |
1,20,000 |
50,000 |
- |
50,000 |
|
17,00,000 |
2,00,000 |
1,40,000 |
60,000 |
- |
60,000 |
|
18,00,000 |
2,30,000 |
1,60,000 |
70,000 |
- |
70,000 |
|
19,00,000 |
2,60,000 |
1,80,000 |
80,000 |
- |
80,000 |
|
20,00,000 |
2,90,000 |
2,00,000 |
90,000 |
- |
90,000 |
|
21,00,000 |
3,20,000 |
2,25,000 |
95,000 |
- |
95,000 |
|
22,00,000 |
3,50,000 |
2,50,000 |
1,00,000 |
- |
1,00,000 |
|
23,00,000 |
3,80,000 |
2,75,000 |
1,05,000 |
- |
1,05,000 |
|
24,00,000 |
4,10,000 |
3,00,000 |
1,10,000 |
- |
1,10,000 |
|
25,00,000 |
4,40,000 |
3,30,000 |
1,10,000 |
- |
1,10,000 |
4. Tax Rebate up to ₹12 Lakh:
• Individuals earning up to ₹12 lakh annually will not have to pay income tax due to rebate under Section 87A.
• For salaried individuals, this rebate extends up to ₹12.75 lakh, considering a standard deduction of ₹75,000.
• However, no tax rebate for special income such as capital gains and the individual will have to pay tax on that special income at the specified special rate of tax.
5. Key Changes in TDS and Tax Compliance:
• Higher TDS Threshold for Senior Citizens: The TDS exemption limit for senior citizens has been doubled from ₹50,000 to ₹1 lakh.
• Updated Return Filing (Section 139(8A)): Taxpayers can now file an updated return within 48 months from the end of relevant assessment year, compared to the previous 24 months limit.
6. Changes in TDS and TCS Limits:
• 194I (Rent): The TDS threshold on rental income has been increased to ₹50,000 per month, earlier being ₹2,40,000 per annum.
• 194J (Professional/ Technical fees): The limit for TDS on professional/technical fees has been increased to ₹50,000 which was ₹30,000 earlier.
• TCS Threshold for LRS Increased: The limit for Tax Collected at Source (TCS) on remittances under the Liberalized Remittance Scheme (LRS) has been hiked from ₹7 lakh to ₹10 lakh.
• Omission of TCS under Section 206C(1H): The provision for TCS on sale of goods has been removed.
7. Benefits for Homeowners:
• Self-Occupied Property: Taxpayers can now declare annual value of the two self-occupied properties as NIL instead of one property earlier for tax purposes, reducing their tax burden.
8. Support for Startups:
• The period of incorporation for startups to avail of tax benefits has been extended by 5 years.
9. Increased Registration Validity for Trusts and Institutions:
• Under Section 12AB of the Income Tax Act, 1961, the registration of trusts and institutions was previously valid for 5 years (or 3 years if activities had not commenced).
• As per Budget 2025, for trusts or institutions with income below ₹5 crore, the validity of registration has been increased from 5 years to 10 years in certain cases.
10. New Income Tax Bill:
• A new income tax bill will be introduced next week, expected to bring further changes in tax policies.
Note:
These changes are applicable from 01.04.2025, i.e., for Assessment Year (AY) 2026-27 and onwards.
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