The Union Budget 2025 has arrived, and with it, a host of exciting updates and changes that will directly impact your personal finances. After much anticipation, some significant shifts have been announced. Let’s dive into the key highlights that have generated buzz—particularly the changes to the tax regime, which are expected to have far-reaching effects on individuals across different income brackets.
The New Tax Regime: Simplification and Relief for Mid-Income Earners
The most significant update in this year’s budget is the change in the new tax regime. The basic exemption limit has been raised to ₹12 lakh, which is a welcome relief for salaried individuals. However, there’s a caveat: capital gains are not included under this exemption. This means that while salaried individuals may benefit from the changes, those whose income is derived largely from investments, real estate, or business profits won’t experience much relief.
Here’s the new tax structure that will come into play:
- Income up to ₹4 lakh – Nil
- ₹4 lakh to ₹8 lakh – 5%
- ₹8 lakh to ₹12 lakh – 10%
- ₹12 lakh to ₹16 lakh – 15%
- ₹16 lakh to ₹20 lakh – 20%
- ₹20 lakh to ₹24 lakh – 25%
- Above ₹24 lakh – 30%
This shift simplifies taxation, especially for middle-income earners, providing a more straightforward framework. While the government hasn’t made a formal statement on scrapping the old regime, the 2025 budget clearly signals a tilt towards making the new tax structure the norm in the years to come. Expect more clarity on this in the weeks ahead, but for now, the old regime’s future is uncertain.
Tax Relief for Senior Citizens and Property Owners
Senior citizens have also received favorable updates. The tax deduction on interest income has doubled from ₹50,000 to ₹1 lakh, easing the burden for retirees and allowing them to maintain better liquidity. This change could make a significant difference for those relying on interest income from savings, fixed deposits, or other investment avenues.
For property owners, there’s good news too: you can now treat two houses as self-occupied for tax purposes, which means you won’t have to pay tax on them. This is a significant relief for families with multiple properties, making it easier for them to manage their tax liabilities.
TDS Threshold on Rental Income Raised
Another important update is the TDS (Tax Deducted at Source) threshold on rental income. It has been increased from ₹2.4 lakh to ₹6 lakh, ensuring that property owners don’t face unnecessary tax deductions at source. This is a great move, as it helps improve cash flow and reduces administrative hassles for property owners with rental income.
Increased TCS-Free Limit for Remittances
For those sending money abroad, the Tax Collected at Source (TCS) limit under the Liberalized Remittance Scheme (LRS) has been increased from ₹7 lakh to ₹10 lakh. This change will provide more flexibility for individuals making international transfers, whether for travel, business, or other purposes. Additionally, if you are remitting money for education and have taken a loan from a financial institution, the TCS will no longer apply, offering a relief to students and parents dealing with education expenses.
More Time to File Updated Tax Returns
Another positive update is the extension of the period to file an updated tax return. Taxpayers now have 4 years instead of the previous 2 years to correct errors or omissions in their filed returns. This provides more time for individuals to course-correct and avoid penalties due to mistakes made in their filings.
No Benefits for Stock Market Gains
While the tax reforms are largely beneficial for salaried individuals, property owners, and senior citizens, stock market gains still don’t enjoy tax exemptions. So, if you’re someone who derives a significant portion of your income from capital gains, the budget doesn’t offer much in terms of direct relief for you.
A Clear Shift Towards the New Tax Regime
As the government continues to make the new tax regime more attractive, it’s becoming increasingly clear that a shift is inevitable. With lower tax rates and higher exemptions but fewer deductions, the new regime is designed for those who prefer simplicity and transparency in taxation. While the old regime still exists for the time being, this budget strongly favors a move towards a streamlined system.
Conclusion: A Favorable Budget for Simplified Taxation
In conclusion, the Union Budget 2025 introduces several progressive reforms aimed at simplifying the tax system, providing relief to middle-income earners, seniors, and property owners. While there’s no immediate change for those with income from investments or real estate, the overall tilt towards the new tax regime signals a move toward simplification. For many individuals, these updates could mean easier tax planning, better liquidity, and fewer administrative hurdles.
As always, it’s a good idea to assess how these changes affect your personal finances and seek expert advice to make the most of the new provisions.
Kapil Jain is the Director of Enrichwise Financial Services Pvt. Ltd and Enrichwise Insurance Broking Services Pvt. Ltd., an IIM Indore Gold Medalist in Finance and an investor for 25+ years.
For Insurance, Investments and Tax Advisory – Contact +919821860804 or email planner@enrichwise.com
