Key Highlights of the Union Budget 2025

The Union Budget 2025 was presented on the morning of 1st February 2025, and it brought about welcome changes for taxpayers and the industry alike. Emphasising four major engines driving economic growth – agriculture, MSME, investments, and exports – the Finance Minister, Mrs Nirmala Sitharaman, presented a budget which proposed major reforms for different sectors and taxpayers.

Here are some of the key highlights of the budget 2025

• Enhancement of the FDI limit in insurance from 74% to 100%, allowing more foreign investments, which will aim to boost the growth of the insurance sector. The move aligns with the government's goal of achieving "Insurance for All" by 2047.
• Introduction of the Prime Minister Dhan-Dhaanya Krishi Yojana covering 100 districts aiming towards the enhancement of agricultural productivity, crop diversification, post-harvest storage and the adoption of sustainable practices.
• Reduction in tariffs and Basic Customs Duty (BCD) on major life-saving medicines, wet blue leather, LED/LCD components, and cobalt powder.
• Emphasis on the extension of the affordable housing scheme and infrastructure projects.
• Boosting the growth and development of MSMEs with customised credit cards and improved investment and turnover limits.
• Emphasis on attaining Aatmanirbharta on the production of pulses.
• Creation of a Makhana Board in Bihar to promote the production of makhana.
• The compliance burden for small charitable trusts and institutions has been reduced by increasing their registration period from 5 years to 10 years.

Key Changes in Direct Taxes for FY 2024-2025

Emphasis was placed on the changes in direct taxes, which affect taxpayers and their tax liabilities. To drive consumption and reduce tax liability, the finance minister proposed an unprecedented increase in the threshold limit of taxable income under the new tax regime. As per the latest proposal, taxpayers can enjoy a full tax rebate on taxable income up to ₹12 lakhs.

In other words, the threshold limit for no-tax income has been increased to ₹12 lakhs from the present ₹7 lakhs. for salaried individuals, considering an additional tax-free limit of standard deduction of ₹75,000, the tax-free income limit is ₹12.75 lakhs.

With this major change in the taxable income, you can save tax of up to ₹80,000 if your income is ₹12 lakhs through tax rebate. If your income is ₹18 lakhs, you can save tax of ₹70,000 under the new regime.

The Income Tax Slabs

Other reforms in taxation norms are as follows –

1. For senior citizens earning interest income, the TDS threshold limit has been increased. Earlier, TDS was applicable for interest income exceeding ₹50,000. This limit has now been revised to ₹1 lakh.
2. Similarly, under the Liberalised Remittance Scheme (LRS), remittances exceeding ₹7 lakhs attracted a TCS. This limit has also been increased to ₹10 lakhs. Furthermore, TCS has been removed on remittances made for educational purposes sourced through a loan from a financial institution.
3. In the case of rent, too, the TDS limit has been increased to ₹6 lakhs from the existing ₹2.40 lakhs.
4. The timeline to file updated tax returns increased from 2 years to 4 years.

What's in It for the Middle Class in Union Budget 2025?

Today’s budget has introduced several measures aimed at benefiting the middle class. Here is the synopsis

• Tax Relief:
  Under the new tax regime, individuals with an income of up to ₹12 lakh will pay zero income tax. For salaried taxpayers, this threshold increases to ₹12.75 lakh, factoring in a standard deduction of ₹75,000.

• Increased Standard Deduction:
  The standard deduction has been raised from ₹50,000 to ₹75,000, offering additional tax relief to salaried individuals.

• Reduced Compliance Burden:
  Small charitable trusts and institutions will benefit from a reduced compliance burden, as their registration period has been extended from 5 years to 10 years.

• Higher TDS Limit on Rent:
  The annual threshold for TDS on rent has been increased from ₹2.40 lakh to ₹6 lakh, easing the tax burden for rentpayers.

• Relief for Senior Citizens:
  The tax deduction limit on interest income for senior citizens has been doubled, rising from ₹50,000 to ₹1 lakh.

These measures are designed to enhance household consumption, savings, and investment, ultimately benefiting the middle class significantly.

In a nutshell:

All these reforms have had a positive effect on the sentiments of investors, taxpayers and the market as a whole. While the income tax bill is expected to be presented later, these changes are a positive step towards the economic growth and development of India.