The Union Budget 2025 introduces various updates affecting income tax, GST, and MSMEs. For income tax, the new tax slabs under the FY 2025-26 regime include no tax for income up to ₹4,00,000 and graduated rates for higher earnings. Taxpayers earning above ₹12,00,000 can benefit from rebates, and the filing of updated returns has been made easier with extended timelines. The budget also addresses TDS rationalization, including lower rates on insurance commissions and securitization investments, as well as changes in thresholds for TDS and TCS. Additionally, two self-occupied properties can now claim “Nil Annual Value,” and tax exemptions have been introduced for withdrawals from the National Saving Scheme. The MSME classification criteria have also been revised, with increased limits for micro, small, and medium enterprises, which will improve their payment terms. Other changes include the reduction of compliance burden in GST and the introduction of a new income tax bill aimed at boosting middle-class spending. Lastly, a streamlined process for company mergers has been proposed to improve business efficiency.
♦ CHANGES IN INCOME TAX :
A. Tax Slab :
1. Tax slab for Individuals under New Regime for FY 2025-26 (AY 2026-27) :
| TOTAL INCOME | RATE |
| Upto 4,00,000/‐ | Nil |
| From 4,00,001/‐ to 8,00,000/‐ | 5% |
| From 8,00,001/‐ to 12,00,000/‐ | 10% |
| From 12,00,001/‐ to 16,00,000/‐ | 15% |
| From 16,00,001/‐ to 20,00,000/‐ | 20% |
| From 20,00,001/‐ to 24,00,000/‐ | 25% |
| Above 24,00,000/‐ | 30% |
- No income tax upto Rs. 12,00,000/- without capital gain.
- In case of salaried employees, no tax shall be payable on salary upto Rs. 12,75,000/-. As benefit of standard deduction of Rs. 75,000/- available to salaried employees.
2. Rebate under section 87A for income chargeable u/s 115BAC is ,
- 100% of tax payable or
- 60,000/-
Whichever is lower.
3. Rebate under section 87A applies only to income taxed at normal rates and not on special rates.
B. Updated Return :
If tax payer misses filing their return or needs to correct their income details, they can submit an updated return under section 139(8A) upto 24 months from the end of the assessment year. The updated return can be filed only with payment of additional tax.
This time limit has been extended as follows :
| Delay | Old Additional Tax | New Additional Tax |
| Upto 12 months | 25% | 25% |
| 12 to 24 Months | 50% | 50% |
| 24 to 36 Months | Cannot be filed | 60% |
| 36 to 48 Months | Cannot be filed | 70% |
Restriction on filing after 36 months :
- If a taxpayer receives a show cause notice under section 148A (meaning the tax department is considering reopening the case), they cannot file an updated return after 36 months.
- However, if the tax officers later decide not to proceed with reopening the case, the taxpayer can still file an updated return within 48 months.
The amendment will be effective from April 1, 2025.
C. Annual value of the self- occupied property :
Taxpayer now can claim “Nil Annual Value” for two self- occupied properties without any condition. This means no deemed rental income will be charged on the second self- occupied house.
D. Exemption to withdrawals by individuals from National Saving Scheme (NSS) from taxation
Withdrawals from the NSS for individuals on or after August 29, 2024 will be exempt from tax for individuals.
This means that the withdrawn amount will not be considered as taxable income and will not attract any TDS or additional tax liability.
E. Extension of registration period for small charitable trusts from 5 years to 10 years
- The registration period for small charitable trusts will be extend to 10 years.
- Small trust means, trust whose total income, without giving effect to the provisions of sections 11 and 12, does not exceed rupees five crores during each of the two previous years.
F. TDS rate rationalization
| S.N. | Section | Current Rate | Proposed Rate |
| 1 | Section 194LBC – Income in respect of investment in securitization trust |
i) 25% – if the payee is an individual or a Hindu undivided familyii) 30% – if the payee is any other person |
10% |
| 2 | Section 194D – Insurance commission |
5% | 2% |
G. TDS threshold rationalization
| S.N. | Section | Current Threshold | Proposed Threshold |
| 1 | Section 193 –
Interest on Securities |
Nil | Rs. 10,000/- |
| 2 | Section 194A –
Interest other than interest on securities |
i) Rs. 50,000/- for senior citizen;
ii) Rs. 40,000/- in case of others when payer is bank, cooperative society and post office iii) Rs. 5,000/- in other cases |
i) Rs. 1,00,000/- for senior citizen;
ii) Rs. 50,000/- in case of others when payer is bank, cooperative society and post office iii) Rs. 10,000/- in other cases |
| 3 | Section 194 –
Dividends |
Rs. 5,000/- | Rs. 10,000/- |
| 4 | Section 194B –
Winnings from lottery or crossword puzzle |
Aggregate of amounts exceeding Rs. 10,000/- | Rs. 10,000/- in respect of single transaction |
| 5 | Section 194BB –
Winnings from horse race |
||
| 6 | Section 194D –
Insurance commission |
Rs. 15,000/- | Rs. 20,000/- |
| 7 | Section 194G – Commission, etc., on sale of lottery tickets | Rs. 15,000/- | Rs. 20,000/- |
| 8 | Section 194H –
Commission on brokerage |
Rs. 15,000/- | Rs. 20,000/- |
| 9 | Section 194I –
Rent |
Rs. 2,40,000/- during the financial year | Rs. 50,000/- per month or part of a month (i.e. New annual limit -Rs. 6,00,000/-) |
| 10 | Section 194J –
Fees for Professional or technical services |
Rs. 30,000/- | Rs. 50,000/- |
| 11 | Section 194K –
Income in respect of units of a mutual fund or specified company or undertaking |
Rs. 5,000/- | Rs. 10,000/- |
| 12 | Section 194LA – Payment of compensation on acquisition of certain immovable property | Rs. 2,50,000/- | Rs. 5,00,000/- |
H. No higher rate of TDS deduction for non -filing of return by others
a) Subject to conditions specified in the two sections, Section 206AB & Section 206CCA of the Act, requires deduction & collection of tax respectively at higher rate when the deductee specified therein is a non-filer of income-tax return.
b) Since it is difficult for deductor/collector to verify whether returns have been filed by the deductee/collectee, it led to unnecessary blocking of capital and increased compliance burden.
c) Thus, it is proposed to omit Section 206AB of the Act & Section 206CCA of the Act.
d) Therefore, higher TDS rates will now only apply in non-PAN cases.
I. Increase in threshold for LRS remittances from Rs. 7 lakhs to Rs. 10 lakhs.
J. Reduction in compliance burden by omission of TCS on sale of specified goods
The provision under sub-section (1H) of section 206C of the Income Tax Act requires a seller to collect tax at source (TCS) at 0.1% on the sale of goods exceeding Rs 50 lakhs in a financial year. Similarly, section 194Q mandates a buyer to deduct tax at source (TDS) at 0.1% for purchases exceeding Rs 50 lakhs. There is overlap as both TCS by the seller and TDS by the buyer apply to the same transaction, which has created compliance challenges, especially for sellers in ensuring that buyers comply with TDS requirements under section 194Q.
To reduce the compliance burden, it is proposed that the TCS requirement under section 206C(1H) will be omitted from April 1, 2025. This amendment aims to simplify business operations and avoid the simultaneous application of both TCS and TDS on the same transaction.
K. Expanded definition of Virtual Digital Assets
The term “Crypto-asset” is now officially included under “Virtual Digital Assets”.
This means that any digital token using blockchain or similar technology to record and secure transactions will be covered under tax laws.
♦ CHANGES IN GST :
i) Pre deposit for penalty orders under GST for appeals
| Situation | Old | New |
| Tax and other dues | 10 % of Tax | 10 % of Tax |
| E- way bill penalty | 25 % of penalty | 10 % of penalty |
| Other penalties | Nil | 10 % of penalty |
ii) Credit note liability can be reduced only if recipient accepts in IMS
The amendment mandates that the output liability (i.e., GST payable by the supplier) can only be reduced if the recipient has reversed the Input Tax Credit corresponding to the amount in the credit note. This introduces a crucial condition for issuing credit notes in the GST framework.
♦ OTHER CHANGES :
i) Changes in MSME classification criteria :
| Type | Current Investment (Cr) | Current Sales (Cr) | New Investment (Cr) | New Sales (Cr) |
| Micro | 1 | 5 | 2.5 | 10 |
| Small | 10 | 50 | 25 | 100 |
| Medium | 50 | 250 | 125 | 500 |
Changes in classification will lead to cover most of the creditors in Micro or Small category, this will result in payment to all these creditors within 15 days to claim the same as expenses as per Section 43B(h) of the Income Tax Act, 1961.
ii) A new income tax bill will be introduced in the parliament by second week of February, 2025 to enhance development and boosting middle class spending.
iii) Fast track merger process for companies to streamline business operations.
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