Union Budget 2025 | Key Takeaways for Personal Taxation

February 5, 2025
Direct Taxation
CA. Kavit Vijay

The Hon’ble Finance Minister presented the Union Budget, 2025 on 1st February 2025 with certain major reliefs for individual taxpayers such as making income tax free up to INR 12 Lakhs, Reduction in slab rates, introducing new slab taxable @ 25%, higher standard deductions, lower TDS rates, increase in threshold limit for TDS deductions, etc. This will leave individual taxpayers with surplus funds for savings.

This article discussed the Key Amendments for individual taxpayers from Union Budget 2025:

1. Change in Tax slab rates:

Following are the updated slab rates under the default (New Tax) regime:

Existing Tax Rates		Merged Tax Rates
Taxable Income	Tax Rates	Taxable Income	Tax Rates
Upto INR 3,00,000	NIL	Upto INR 4,00,000	NIL
3,00,001 – 7,00,000	5%	4,00,001 – 8,00,000	5%
7,00,001 – 10,00,000	10%	8,00,001 – 12,00,000	10%
10,00,001 – 12,00,000	15%	12,00,001 – 16,00,000	15%
12,00,001 – 15,00,000	20%	16,00,001 – 20,00,000	20%
Above 15,00,000	30%	20,00,001 – 24,00,000	25%
		Above 24,00,000	30%

Further, a rebate under section 87A has been proposed to increase from INR 25,000 to INR 60,000/-. Such rebate shall make income tax free up to INR 12,00,000/-.

Following are net tax savings under new tax regimes on different income categories:

Income	Tax under the existing regime			Tax under the proposed regime			Net Tax Saving
	Income Tax	Rebate U/s 87A	Net Tax Liability	Income Tax	Rebate U/s 87A	Net Tax Liability
7,00,000	20,000	20,000	–	15,600,	15,600	–	–
10,00,000	52,000	–	52,000	40,000	40,000	–	12,000
12,00,000	83,200	–	83,200	60,000	60,000	–	23,200
15,00,000	1,45,600	–	1,45,600	1,09,200	–	1,09,200	36,400
20,00,000	3,01,600	–	3,01,600	2,08,000	–	2,08,000	93,600
25,00,000	4,57,600	–	4,57,600	3,43,200	–	3,43,200	1,14,400
30,00,000	6,13,600	–	6,13,600	4,99,200	–	4,99,200	1,14,400

It is pertinent to note that no changes are prescribed for old tax regimes making it less beneficial for the taxpayers despite having higher deductions.

Standard deduction from the salary income has been proposed to increase from INR 50,000 per year to INR 75,000 per year. Accordingly, no tax shall be charged on salary income up to INR 12,75,000/- under the default (new) tax regime.

2. Changes in threshold limit for TDS Deduction

The following provisions related to TDS Deductions have been amended:

a. TDS on Interest on Securities (Section 193)

Under existing provisions, TDS on interest on securities is to be deducted at the rate of 10% where the interest income exceeds the specified threshold limit. The Union budget has proposed to increase the threshold limit for TDS deduction to the following extent:

Particulars	Existing Threshold Limited	Proposed Threshold Limit
Interest paid to resident Individuals and HUF on any debenture issued by a company in which the public is substantially interested	5,000	10,000
Any other interest in security	NIL	5,000

B. TDS on Dividend (Section 194)

Under existing provisions, TDS on dividend income paid to individual shareholders is to be deducted at the rate of 10% where the dividend amount exceeds INR 5,000/-.
The Union Budget 2025 has proposed to increase such a threshold limit to INR 10,000/-.

c.TDS on Interest other than interest on securities (Section 194A)

Under existing provisions, TDS on interest income is to be deducted at the rate of 10% where the interest income exceeds the specified threshold limit. The Union budget has proposed to increase the threshold limit to the following extent:

Particulars	Existing Threshold Limited	Proposed Threshold Limit
Interest is paid by Banks, Cooperative societies, and post office	40,000	50,000
interest is provided by any other person	5,000	10,000
interest is provided to a senior citizen	50,000	1,00,000

d. TDS on payment of rent (Section 194I)

Under existing provisions, TDS on payment of rent is required to be deducted if the aggregate amount of rent exceeds INR 2,40,000/- during the financial year.
Union Budget has proposed to change the threshold limit to INR 50,000/- per month or part of the month.
Therefore, if the property is taken on rent for 2 months only and rent is to be paid of INR 70,000/- per month then TDS is to be deducted as per amendment even if the aggregate amount does not exceed INR 6,00,000/- during the year.

e. TDS on Compensation on acquisition of Immovable property.

Under existing provisions, if the compensation for compulsory acquisition of immovable property exceeds INR 2,50,000 in a financial year then TDS @ 10% is required to be deducted on the same under section 194LA.
Union Budget has proposed to increase the threshold limit to INR 5,00,000/- in a Financial year.

f. Amendment in other TDS provisions

Apart from above mentioned TDS provisions, the Union budget has proposed to change the threshold limit under the following TDS provisions:

Section	Particulars	Existing Threshold Limited	Proposed Threshold Limit
194J	Fees for professional services, technical services, royalty, and sums as per section 28(VA)	Aggregate payment exceeds INR 30,000/- during PY	INR 50,000/-
194D	Insurance Commission	15000	20000
194G	Commissioner, etc. on lottery tickets	15,000	20000
194H	Commission or Brokerage	15,000	20,000
194B	winnings from the lottery, crossword puzzles, etc	Aggregate payment of INR 10,000/- per FY	INR 10,000 per transaction
194BB	Winning from horse race	Aggregate payment of INR 10,000/- per FY	INR 10,000 per transaction

3. Deletion of Higher TDS deduction provisions for non-filer of income tax returns

As per Section 206AB of the Income Tax Act, TDS at a higher rate is required to be deducted for the person who has failed to file the income tax return for two consecutive financial years and has TDS deducted or TCS collected during these years exceeding INR 50,000.
Union budget has proposed to omit section 206AB with effect from 01.04.2025.

4. Revocation of TCS Provisions on sale of goods (Section 206(1H))

As per Section 206C(1H) of the Income Tax Act, 1961, the seller is required to collect TCS at the rate of 0.1% where the aggregate amount of consideration exceeds INR 50,00,000/- during the financial year.
The seller is required to collect the TCS and deposit the same to the account of the government monthly.
The Union Budget has proposed to revoke TCS on the sale of goods w.e.f. 01.04.2025.

5. Extended time for filing the updated return

A taxpayer is allowed to file a belated return up to 31st December of the Assessment year. After 31st December, taxpayers are allowed to file updated returns.
Under existing provisions, updated returns can be filed up to 2 years from the end of the relevant assessment year on payment of additional tax.
Union budget has proposed to extend the time limit for filing updated returns from 2 years to 4 years on payment of the following additional tax:

Time of filing of Updated return from the end of the relevant assessment year	% of Additional Tax and Interest payment
12 Months	25%
24 Months	50%
36 Months	60%
48 Months	70%

6. Other Amendments

Union Budget has also proposed the following other amendments for personal taxes:

No prosecution for delayed payment of TCS if the payment is made before the due date of filing the TCS return for the relevant quarter.
The conditions for the adoption of nil value for self-occupied property are proposed to be removed with effect from 1 April 2025.

Conclusion

The Union Budget has brought various funds saving perks for individual taxpayers in the form of higher tax-free income, higher threshold limit for TDS deduction, etc. Further, the revocation of TCS provisions on the sale of goods will do away with one of the major monthly compliance requirements of the entire industry. An extended time limit to file updated returns will increase the tax return filings.