Budget 2025 – Summary of Important Income Tax Proposals

Summary: The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, focused on reforms in taxation, agriculture, MSMEs, and exports. Direct tax proposals included no tax on incomes up to Rs. 12 lakh under the new tax regime, with a rebate increase under Section 87A and a standard deduction for salaried individuals, bringing the no-tax limit to Rs. 12.75 lakh. The presumptive taxation scheme was extended to non-resident service providers for electronics manufacturing. Incentives for International Financial Services Centres (IFSC) were introduced, including tax exemptions for ship leasing and life insurance policies. The period for trust registration validity was increased from 5 to 10 years for certain conditions. The tax treatment of ULIPs was adjusted, and the timeline for tax benefits for start-ups was extended to 2030. The budget also proposed significant changes to TDS rates and thresholds, including reductions for insurance commissions and securitization trust income. Taxation on non-filers was addressed by removing higher TDS/TCS, while a new deduction under Section 80CCD for contributions to NPS Vatsalya was introduced. Additionally, the timeline for filing updated returns was extended from 2 to 4 years. The budget emphasizes the government’s long-term vision for India’s development, highlighting the importance of reforms that may take time to show results but aim for gradual and sustained growth. The commentary suggests that tangible development should reach the common citizen for true progress.

> INTRODUCTION

♦ Our Finance Minister Ms. Nirmala Sitharaman presented the Union Budget 2025 to the Parliament on 1^st February, 2025.

♦ She emphasis Viksit Bharat by quoting the words of well-known Telugu poet which reads as “A Country is not just its soil, a country is its people”.

♦ Budget 2025 focused on Garib, Youth, Annadata and Nari.

♦ Our Future Development is based on Four Engines which are:-

• Agriculture
• MSME
• Investment
• Exports

♦ This Budget aims to initiate transformative reforms across six domains:-

• Taxation
• Power sector
• Urban Development
• Mining
• Financial Sector
• Regulatory Reforms

♦ A New Income Tax Law Bill would be introduced in budget session

> DIRECT TAX PROPOSALS

• No change for income tax rate for the Assessment year 2025-26 corresponding to financial year 2024-25 both under old regime and new regime for all the taxpayers.
• No Tax up to Rs.12 lakh Income under New Regime due to change in limit of Rebate u/s 87A from Rs.25,000/- to Rs.60,000/-. Due to standard deduction of Rs.75,000/- to salaried class person there would be no tax up to Rs.12.75 lakh of Income.
• Scheme of presumptive taxation extended to those Non-Resident who are providing services to a resident company engaged in electronics manufacturing w.e.f. Asse. Yr. 2026-27 u/s 44BBD.
• Various incentives are provided to International Financial Services Centre (IFSC) like

a) Extension of sunset dates

b) Exemption on life insurance policy from IFSC Insurance offices

c) Exemption to capital gains and dividend for ship leasing units in IFSC

d) Simplified regime for fund managers based in IFSC

• Extension of benefits of tonnage tax scheme to inland vessels to promote inland water transportation industry w.e.f. Yr. 2026-27.
• Period of validity of registration of trust or institution increased from 5 years to 10 years where total income without giving effect to the provisions of sections 11 and 12, does not exceed Rs. 5 crores during each of the two previous year, preceding to the previous year in which such application is made u/s 12A(1)(ac)(i)to(v).
• ULIPs to which exemption under clause (10D) of section 10 does not apply, is a capital asset, would be chargeable as capital gain on redemption and same would be classified as equity oriented fund.
• Extension of timeline for tax benefits to start-ups incorporated before 01.04.2030
• TDS Rates & threshold rationalization

a) TDS rate reduce from 5% to 2% on income by way insurance commission u/s 194D w.e.f. 01.04.2025

b) TDS rate reduce from 25% & 30% to 10% on income payable by a securitization trust to an investor being a resident u/s 194LBC w.e.f. 01.04.2025

c) TDS threshold limits

• Sub-section (1H) of section 206C mandates tax collection at source (TCS) by a seller while Section 194Q provides for tax deduction at source (TDS) by a buyer on the same transaction and therefore to mitigate the difficulty of getting same transaction taxable twice, it is proposed to non-application of section 206C(1H) w.e.f. 01.04.2025.
• Removal of higher TDS/TCS for non-filers of return of income w.e.f. 01.04.2025.
• Deduction under section 80CCD for contributions made to NPS Vatsalya to be allowed to the parent/guardian’s total income, of the amount paid or deposited in the account of any minor under the NPS to a maximum of Rs 50,000/- overall as mandated under sub-section (1B) of section 80CCD w.e.f. Asse. Yr. 2026-27.
• Annual value of the property consisting of a house or any part thereof shall be taken as nil, if the owner occupies it for his own residence or cannot actually occupy it due to any reason. Requirement of a reason of not occupying due to employment, business or profession have been removed.
• Extending the time-limit to file the updated return from 24 months to 48 months i.e. from 2 years to 4 years from the end of the relevant assessment year.

> COMMENT

It is always better for any country to have a Firm Government and that is too for a long period of time. Currently we have that type of Government. We all knew the fact that a seed requires time to convert it into a big tree. It has not happened in a day or two. And trees take time to bear fruit. There are some trees who don’t bear fruit. So, what I mean is that development takes time. And few of the measures may give negative results too. What we can do is focus on learning and gradual development over the period of time.

Truly as an Indian we all are witnessing Amrut kaal. For the next twenty-twenty five years’ time is our time. Every Indian would be proud as our country would excel in every field in near future. What we require as a citizen of India is to have Trust in our current Government.

As a common man of course there are few important things where attention should be given by the government officials as well as political leaders at root level. Those things are:-

• Proper walkable roads to all the citizen across India
• Proper drinking water to all the citizen across India
• Electricity to all the citizen across India
• Stricter Rules and regulations in real estate sectors who are developing homes for every citizen across India
• System to check whether distribution of any government schemes reaches to right people at right time

At the end development should not be reflected only on paper with charts and tables. It must be experienced by the common man of the country. And to give that experience is a responsibility of a government and every political leader. And what is our responsibility is to pat government for good things and keep them awake by exercising our right of vote at the time of election.