The much-awaited Union Budget 2025 is finally here. This time, the government has paid special attention to middle-income groups, with many announcements offering relief to their pockets. From increasing the exemption limit to enhancing deductions for various investment schemes, there is a lot in store for taxpayers on the positive side. Let’s discuss all the details.
Budget 2025: Changes in Tax Structure
The Budget 2025 has increased the tax exemption limit to ₹12 lakh per annum. And with the standard deduction of ₹75,000 under section 87A, as a salaried individual or a pensioner, you do not have to pay any taxes up to ₹12.75 lakh.
Changes were also made to the tax slab. Here are the details:
| Annual Income | Tax Rate |
| Upto ₹4,00,000 | Nil |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Note: The revised tax slab of Budget 2025 applies to the financial year 2025-26 and Assessment Year 2026-27.
Savings Under New Tax Slab
As a taxpayer, depending on your income, you can save up to ₹1.1 lakh through tax rebates. Here are the details of the tax changes in Budget 2025.
| Income | Rates (%) | Liability | Proposed Rates | Tax Liability Under New Rate | Savings |
| Upto ₹3,00,000 | Nil | Nil | Nil | Nil | Nil |
| ₹4,00,000 | 5% | ₹5,000 | Nil | Nil | ₹5,000 |
| ₹7,00,000 | 5% | ₹20,000 | 5% | ₹15,000 | ₹5,000 |
| ₹8,00,000 | 10% | ₹30,000 | 5% | ₹20,000 | ₹10,000 |
| ₹10,00,000 | 10% | ₹50,000 | 10% | ₹40,000 | ₹10,000 |
| ₹11,00,000 | 15% | ₹65,000 | 10% | ₹50,000 | ₹15,000 |
| ₹12,00,000 | 15% | ₹80,000 | 10% | ₹60,000 | ₹20,000 |
| ₹13,00,000 | 20% | ₹1,00,000 | 15% | ₹75,000 | ₹25,000 |
| ₹14,00,000 | 20% | ₹1,20,000 | 15% | ₹90,000 | ₹30,000 |
| ₹15,00,000 | 20% | ₹1,40,000 | 15% | ₹1,05,000 | ₹35,000 |
| ₹16,00,000 | 30% | ₹1,70,000 | 15% | ₹1,20,000 | ₹50,000 |
| ₹17,00,000 | 30% | ₹2,00,000 | 20% | ₹1,40,000 | ₹60,000 |
| ₹18,00,000 | 30% | ₹2,30,000 | 20% | ₹1,60,000 | ₹70,000 |
| ₹19,00,000 | 30% | ₹2,60,000 | 20% | ₹1,80,000 | ₹80,000 |
| ₹20,00,000 | 30% | ₹2,90,000 | 20% | ₹2,00,000 | ₹90,000 |
| ₹21,00,000 | 30% | ₹3,20,000 | 25% | ₹2,25,000 | ₹95,000 |
| ₹22,00,000 | 30% | ₹3,50,000 | 25% | ₹2,50,000 | ₹1,00,000 |
| ₹23,00,000 | 30% | ₹3,80,000 | 25% | ₹2,75,000 | ₹1,05,000 |
| ₹24,00,000 | 30% | ₹4,10,000 | 25% | ₹3,00,000 | ₹1,10,000 |
Note: Even if your income is less than ₹12 lakhs, tax filing is mandatory to claim rebate benefits. You can skip filing ITR if your income is less than ₹4 lakhs (basic exemption limit).
Other Tax Relief Under the Union Budget 2025
Here are some key income tax reliefs in the 2025 Union Budget:
- The government has proposed amendments under Section 23 of the Income Tax Act to provide tax benefits on a second self-occupied house. Previously, only one self-occupied house property was considered tax-free, while the second was taxable based on its notional value.
- To help retirees (over 60 years of age) increase their savings rate, the government has proposed to double the deduction on interest income to ₹1 lakh from the previous cap of ₹50,000.
- As a taxpayer, you will now have four years to file updated tax returns and correct errors or provide any income details you missed mentioning. Previously, this period was two years. The additional rate on the updated filing will be 60% of the tax amount, including any interest if filed between 24 and 36 months. The rate increases to 70% for filings made between 36 and 48 months.
Changes in Tax Deducted and Collected at Source Under Union Budget 2025
Another tax change in Budget 2025 is related to TCS and TDS. The government has proposed amendments to the TCS on remittances made under the Liberalised Remittance Scheme (LRS). The new rule will increase the threshold limit to ₹10,00,000 from the previous ₹7,00,000. Additionally, the proposal has been made to exempt TCS from remittances made for educational purposes, such as loans.
| Section | Transaction Type | Proposed Limit | Current Limit |
| Section 193 | Interest on securities | ₹10,000 | Nil |
| Section 194A | Interest through source than securities | ₹1,00,000 for senior citizens | ₹50,000 for senior citizens |
| ₹50,000 when the bank/ post-office/ co-operative society pays the interest | ₹40,000 when the bank/ post-office/ co-operative society pays the interest | ||
| ₹10,000 for other sources | ₹5,000 for other sources | ||
| Section 194 | Dividend income (individual shareholders) | ₹10,000 | ₹5,000 |
| Section 194K | Income from mutual fund units | ₹10,000 | ₹5,000 |
| 194B | Income from lottery winnings | ₹10,000 (for a single transaction) | ₹10,000 (aggregate amount in the financial year) |
| 194BB | Income from horse race | ₹10,000 (for a single transaction) | ₹10,000 (aggregate amount in the financial year) |
| 194D | Insurance commission | ₹20,000 | ₹15,000 |
| 194G | Commission on lottery tickets | ₹20,000 | ₹15,000 |
| 194H | Brokerage | ₹20,000 | ₹15,000 |
| 194-I | Rent | ₹50,000 per month or part of the month | ₹2,40,000 per financial year |
| 194-J | Fee for technical or professional service | ₹50,000 | ₹30,000 |
| 194LA | Income via enhanced commission | ₹5,00,000 | ₹2,50,000 |
Earlier, the TDS and TCS applicable to non-income tax return filers were higher under sections 206AB and 206CCA. However, in the Budget 2025, proposals were made to omit these sections.
Taxation on Investment Schemes
The government has proposed amendments to the tax treatment of the following two schemes to ensure taxpayers benefit from Budget 2025.
NPS Vatsalya Schemes
Launched in September 2024, this scheme allows parents or guardians of a minor to open a National Pension Scheme (NPS) account for their child below the age of 18. The primary objective behind this scheme is to provide long-term financial security to their little ones.
To promote investment in this scheme, the government has proposed a tax deduction on contributions of up to ₹50,000 under Section 80CCD(1B) of the Income Tax Act under Budget 2025.
Earlier, the deduction benefit was available only for individual contributions to NPS Tier 1.
ULIPs
Previously, if you purchased the ULIP on or after 1st February 2021, and the annual premium is over ₹2.5 lakhs, the income from it will be considered as capital gains and taxed accordingly. This means that, since they have a lock-in period of five years, long-term capital gains would apply to them at a rate of 12.5%.
For other policies purchased before 1st February 2021, the payout was treated as ‘Income from Other Sources.’ Depending upon your slab, the rate can go up to 30%.
However, in the Union Budget 2025, the government has proposed that now all policies where the premium is equal to or greater than 10% of the sum assured, the payout will be considered as capital gains. For policies where the premium is less than the mentioned threshold, they will continue to enjoy tax exemption benefits under section 10(10D).
Conclusion
The Union Budget 2025 brings significant tax benefits and structural reforms aimed at easing the financial burden on taxpayers. With higher exemptions, deductions, and investment incentives, you now have more opportunities to maximise your savings and plan your finances effectively. The revisions in tax slabs, reliefs on self-occupied property, and higher deductions for senior citizens further strengthen your financial security.
