Budget Speech 2025 - A quick read on Direct taxes

[CSSwati Rawat]

              Budget Speech 2025 - Tax Reforms and Key Proposals

Streamlining taxation as part of its broader vision for ‘Vikasith Bharat’.

A new Income Tax Bill will reduce the density of current laws, featuring clearer and more abridged provisions, cutting both chapters and words by half.

Tax Rate Structure Revisions –

• No Tax on Income Up to ₹12 Lakh.
• Individuals earning up to ₹12 lakh annually (₹1 lakh per month) will pay no income tax under the new tax regime.
• For salaried taxpayers, due to the ₹75,000 standard deduction, this threshold is ₹12.75 lakh.

Revised Tax Slabs and Rates -

          •        0 – ₹4 lakh: 0%

          •        ₹4 – ₹8 lakh: 5%

          •        ₹8 – ₹12 lakh: 10%

          •        ₹12 – ₹16 lakh: 15%

          •        ₹16 – ₹20 lakh: 20%

          •        ₹20 – ₹24 lakh: 25%

          •        Above ₹24 lakh: 30%

Tax Rebates and Benefits - Taxpayers earning up to ₹12 lakh (excluding special income like capital gains) will receive a rebate, resulting in zero tax payable.

Other Major Tax Proposals

1. TDS and TCS Reforms

1. Lessening in the number of TDS rates and thresholds for simplification.
2. Increase in tax deduction limits.
3. Senior citizens’ interest deduction limit increased from ₹50,000 to ₹1 lakh.
4. TDS threshold for rent payments increased from ₹2.4 lakh to ₹6 lakh annually.
5. TCS threshold for remittances under RBI’s Liberalized Remittance Scheme (LRS) increased from ₹7 lakh to ₹10 lakh.
6. TCS exemption for educational payments funded by loans from specified financial institutions.
7. Higher TDS provisions to apply only to non-PAN holders.

2. Voluntary Compliance and Updated Returns

1. Time limit for filing updated returns extended from 2 to 4 years.
2. The government highlights the success of the updated return facility introduced in 2022, with nearly 90 lakh taxpayers voluntarily updating their incomes.

3. Charitable Trusts and Compliance Relief

1. Registration period for small charitable trusts extended from 5 to 10 years.
2. Provisions to prevent disproportionate penalties for minor compliance errors.

4. Property and Transfer Pricing Reforms

1. Taxpayers can now claim the benefit of two self-occupied properties without conditions.
2. Introduction of a 3-year block period scheme for determining arm’s length pricing of international transactions.
3. Expansion of safe harbour rules to reduce litigation and provide tax certainty in international taxation.

5. Senior Citizen Benefits

1. Exemption for withdrawals from National Savings Scheme (NSS) accounts with no interest accrual after August 29, 2024.
2. Extension of similar benefits to NPS (Vatsanya) accounts.

6. Digitalization and Dispute Resolution

1. Implementation of paperless, digital processes for tax orders and appeals.
2. The Vivaat Se Vishwaas dispute resolution scheme has seen 33,000 taxpayers settle disputes.