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Key Highlights of the Income Tax Union Budget 2025

Income Tax Union Budget

The Income Tax Union Budget 2025 has introduced significant changes in tax structures to provide relief to the middle class. With revised income tax slabs, an increased income tax rebate, and additional benefits for salaried individuals, this budget aims to enhance disposable income. This blog will break down the key aspects of Budget 2025, focusing on tax reforms, economic growth measures, and financial benefits for different sectors. 

Fiscal Plan 

Regarding fiscal consolidation, the income tax union budget estimates for 2025–2026 are set at 4.4 percent of GDP, while the revised estimate for the fiscal deficit for 2024–2025 is 4.8 percent. It is estimated that government receipts (not including borrowings) will amount INR 34.96 trillion in 2025–2026, while total expenditures will total INR 50.65 trillion. 

Accelerated growth, inclusive development, private sector investments, and increasing middle-class purchasing power are the main objectives of the Union Budget 2025. It prioritises zero poverty, high-quality healthcare, education, skilled employment, and women’s economic involvement, all of which are guided by the Viksit Bharat vision.  

Important Aspects of the Union Budget for 2025 

Agriculture  

Under the Modified Interest Subvention Scheme, the Kisan Credit Card (KCC) raises the lending limit from ₹3 Lakh to ₹5 Lakh. India Post: Develops into a logistics company that uses its extensive network to assist MSMEs, business owners, and rural economies. The PM Dhan-Dhaanya Krishi Yojana benefits 1.7 crore farmers by increasing agricultural productivity in 100 districts through better irrigation, storage, and financing.

With an emphasis on women, young people, and small farmers, the Rural Prosperity and Resilience Program increases employment in rural areas through investment, technology, and skill development. Aatmanirbharta’s mission in Pulses is to achieve self-sufficiency in Tur, Urad, and Masoor over a six-year period. The Comprehensive Program for Fruits and Vegetables improves supply networks, processing, and production. In Bihar, the Makhana Board was established to improve marketing, processing, and production. 

MSME  

With the revision of the MSME classification standards, the investment and turnover restrictions will be increased to 2.5 and 2 times, respectively. 

Category 

Current Credit Guarantee 

Enhanced Credit Guarantee 

Additional Credit

Details 

Micro and Small Enterprises 

₹5 Crore 

₹10 Crore 

₹1.5 Lakh Crore in 5 years 

Credit availability boosted for MSMEs. 
Startups 

₹10 Crore 

₹20 Crore  Guarantee fee moderated to 1% for loans in 27 focus sectors for Atmanirbhar Bharat. 
Well-run Exporter MSMEs 

           – 

Up to ₹20 Crore 

Term loans for well-managed exporter MSMEs. 

Startups will be supported by a ₹10,000 Crore Fund of Funds, and 5 Lakh first-time women, SC, and ST businesses will benefit from ₹2 Crore term loans. New plans will increase the production of toys, leather goods, and shoes.

Income Tax Union Budget

Investments

i. Investing Money in People 

Programs like Poshan 2.0 and Saksham Anganwadi concentrate on giving women, children, and teenage females nutritional support.  

Enhancing innovation and digital literacy in schools is the goal of the Bharatiya Bhasha Pustak Scheme, the growth of Atal Tinkering Labs, and internet connectivity via Bharatnet. 10,000 additional seats will be added to medical education, and 200 day care cancer centres will be built. Measures for urban livelihoods and increased funding for street sellers under PM SVANidhi are part of the Union Budget 2025–2026.  

Nearly 1 crore gig workers will benefit from the government’s provision of identity cards, e-Shram portal registration, and healthcare under the PM Jan Arogya Yojana.  

ii. Making Economic Investments

Economic activity would be increased by the implementation of a ₹10 Lakh Crore Asset Monetisation Plan, a 3-year PPP infrastructure pipeline, and ₹1.5 Lakh Crore in capital expenditure support for states. Improving water, sanitation, and municipal services is the main goal of the Jal Jeevan Mission and urban sector reforms. 

Support for the shipbuilding, maritime, and electricity industries, as well as the expansion of airports and transport networks, are also included in the Union Budget 2025. In order to promote employment and growth, there are additional funds for tourism, mining reforms, and affordable housing.  

iii. Making Innovation Investments

R&D led by the private sector is allocated ₹20,000 Crore, and next-generation startups will be supported by a Deep Tech Fund of Funds.  

With the creation of a National Geospatial Mission to modernise land records and a second Gene Bank for crops, the budget also places a strong emphasis on food security. 

iv. Exports  

MSME exports, talent development, and the handling of high-value items would all be improved by programs like the Export Promotion Mission, BharatTradeNet, and Industry 4.0 support. For businesses that invest their whole premium in India, the insurance industry’s Foreign Direct Investment (FDI) cap would be raised from 74% to 100%.  

v. Indirect Taxes 

  • Rationalisation of Customs Tariffs: Exempt Social Welfare Surcharge on 82 lines, lower tariffs on certain commodities, and eliminate seven tariff rates.
  • Drug Relief: Six of the 36 life-saving medications with concessional duty have been added to the BCD exemption list.  
  • Support for Domestic Manufacturing: Adjust tariffs on electronics, extend shipbuilding exemptions for ten years, and exempt key minerals, loom machinery, and capital goods for EV and mobile batteries from BCD. 
  • Export Promotion: Strategies include extending the export period for handicrafts, lowering the BCD on marine products to encourage exports, exempting wet blue leather and extending the export period for domestic MROs of railway goods.
  • Trade Facilitation: Increase the end-use import period to one year with quarterly files, provide voluntary compliance for tariff declarations, and set a two-year maximum for provisional assessments.  

 vi. Direct Taxes  

Rationalisation of TDS/TCS:

  • Raising the rent cap for older folks to ₹6 lakh and the interest tax deduction cap to ₹1 lakh.  
  • Remove TCS on educational remittances from lent funds and increase the TCS threshold for remittances under LRS from ₹7 Lakh to ₹10 Lakh.  
  •  Apply greater TDS exclusively in non-PAN circumstances and omit TCS from sales of goods.  

Investment and Employment Proposals:

Offer incentives for IFSC operations, AIFs in infrastructure, and Sovereign/Pension Funds until March 31, 2030; extend benefits to inland vessels and start-up incorporation; and give tax certainty to non-residents engaged in electronics manufacturing.  

Tax Reforms and Personal Income

The Union Budget 2025 states that under the new system, the “Nil tax” slab will be increased to ₹12 Lakh (₹12.75 Lakh for salaried taxpayers because of a ₹75,000 standard deduction).  

The following are the updated slab rates for FY 2025–2026 (AY 2026–2027): 

Income Range  Tax Rate 
₹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% 

 

Income  Tax Benefit 
Up to ₹12 Lakh  No tax payable due to slab rate reductions and rebates 
₹12 Lakh  ₹80,000 benefit (100% of tax payable as per existing rates) 
₹18 Lakh  ₹70,000 benefit (30% of tax payable as per existing rates) 
₹25 Lakh  ₹1,10,000 benefit (25% of tax payable as per existing rates) 

Conclusion  

Significant reforms are introduced in the Union Budget 2025 to boost financial inclusion, ease of doing business, and economic growth while providing targeted assistance to the middle class. These actions demonstrate the government’s dedication to creating a developed, affluent India.  

*Disclaimer: There are terms and limitations. This article’s content is general in nature and solely intended for educational purposes. It is not a replacement for tailored guidance based on your unique situation.  

FAQs

1. What are the new income tax slabs under the Income Tax Union Budget 2025?

The new income tax slab structure has been revised to benefit taxpayers, with income up to ₹12 lakh being tax-free.

2. What is the rebate in income tax under Budget 2025?

The income tax rebate has been extended under Section 87A, ensuring zero tax liability for individuals earning up to ₹12 lakh.

3. How does the Income Tax Union Budget 2025 help the middle class?

The budget provides higher tax rebates, increased deductions, and economic support measures aimed at benefiting middle-class taxpayers.

4. What benefits are available for businesses in Budget 2025?

Startups and MSMEs get tax holidays, lower corporate tax rates, and easier credit access to encourage business growth.

5. How does Budget 2025 impact the gig economy?

Freelancers and independent workers receive access to welfare schemes and skill development programmes under the new reforms.

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