Every year, when the Union Budget is announced, there’s a flurry of discussions about how it affects the economy, the markets, and most importantly, our personal finances.
And if you’ve been avoiding the “budget news” avalanche, we don’t blame you. Taxes and budget news are very overwhelming and confusing.
But now that all noise is down we would like to discuss the major updates in the Budget 2025 and the brand-new Income Tax Bill which can affect your personal finance.
Let’s break down the most important changes from the Budget 2025, including tax slab changes, TCS adjustments, and other key updates. Then, let’s delve into the major reforms introduced by the New Income Tax Bill and how it differs from the old one. So, buckle up as we explain everything in simple terms.
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Buckle up. Here we go!
Major Changes in Budget 2025
The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, brought several significant changes aimed at easing the tax burden on individuals and boosting economic growth.
1. New Income Tax Slabs Under New Tax Regime
One of the most notable announcements in Budget 2025 is the revision of income tax slabs under the new tax regime. Here’s a breakdown of the new slabs:
These new slabs under the new tax regime are designed to reduce the tax burden on middle-class taxpayers.
Individuals earning up to ₹12,75,000 annually will not pay income tax because of an increased rebate under Section 87A, which has been raised to ₹60,000 and the standard deduction of ₹75,000.
Confused by the new slabs? Use our Income Tax Calculator to instantly calculate your tax liability under the new regime.
2. TDS and TCS Updates
The government has adjusted the thresholds for TDS (Tax Deducted at Source), which is the tax deducted upfront from various earnings.
Senior citizens earning interest from bank deposits or other sources will not have TDS deducted unless their total interest income exceeds ₹1 lakh. Previously, this limit was ₹50,000.
Similarly, for rental income, the TDS threshold has increased from ₹2.4 lakhs to ₹6 lakhs, providing more flexibility for landlords.
Coming to TCS (Tax Collected at Source), the Government has increased the threshold to collect TCS on remittances under the Liberalised Remittance Scheme (LRS) from ₹7 lakhs to ₹10 lakhs. This means you can travel or invest more internationally without worrying about tax collection.
Also, the TCS will be removed on remittances made for educational purposes when these remittances are financed through loans from specified financial institutions.
3. Tax Relief for Property Owners
If you own more than one property, there’s good news: you can now claim a nil annual value for up to two self-occupied properties. This means you don’t have to pay any tax on the notional rent of both these properties, provided you use them for your personal stay.
Previously, owning a second property for personal use came with its own set of tax complications. Under the old rules, if you owned a second house, you had to pay tax on it even if it was never rented out. The tax was based on the “deemed” rental income—essentially, the rent you could have potentially earned if you had leased the property. This became a headache for homeowners, especially those with a second home they weren’t renting out but were holding for personal use.
For instance, if your job took you to another city and you were living in a rented apartment, you had to go through extra steps to prove that your original home was “self-occupied” to avoid paying tax on its notional rent. This process was tedious, and many people paid extra taxes on a property they weren’t profiting from.
But now, with the new rules, you can claim up to two properties as self-occupied and avoid paying tax on their notional rent altogether, offering significant tax relief for people with more than one home used for personal purposes.
Remember, all these tax reliefs will be applicable only in the next financial year.
The New Income Tax Bill 2025: A Fresh Start
The Income Tax Act, 1961 has been our guiding tax law for over six decades. But, with changing times and the developing economy, the government felt the need for a complete overhaul. Enter the New Income Tax Bill 2025—a simplified, more efficient version of the old law.
Here are the major updates and changes introduced in the new bill:
1. Removal of Obsolete Provisions
The new bill proposes to remove over 300 obsolete and redundant laws, simplifying the tax code and reducing legal disputes. Examples of removed provisions include Section 80CCA and Section 80CCF, which were related to deductions for investments in specific schemes and bonds.
2. Introduction of the “Tax Year” Concept
The bill replaces the terms “previous year” and “assessment year” with the concept of a “tax year.” This change aligns India’s tax system with international standards, reducing confusion and simplifying tax filing procedures.
3. Simplified Structure and Language
The new bill is structured to be more comprehensive and easier to read. It eliminates provisos and explanations scattered throughout the existing Act, using sub-sections, clauses, and sub-clauses instead. The language has been modernized to align with contemporary economic practices, making it more intuitive for taxpayers.
4. Enhanced Digital Integration
The bill emphasizes digital integration in tax administration, granting tax authorities broader access to electronic records, cloud storage, and online accounts. This aims to curb tax evasion by enabling real-time monitoring and compliance enforcement.
5. Streamlined TDS Provisions
The bill consolidates TDS provisions, clarifying rates and simplifying thresholds. This change is designed to reduce complexity and enhance the ease of doing business by making TDS compliance more straightforward.
6. Definition of Virtual Digital Assets
The bill broadens the definition of Virtual Digital Assets to include cryptocurrencies and other digital assets, simplifying their taxation process.
Final Thoughts
The Budget 2025 and the New Income Tax Bill 2025 have brought sweeping changes to the tax landscape in India. With the new income tax slabs, adjustments to TDS & TCS, and simplified compliance rules, the government aims to create a more streamlined and taxpayer-friendly system.
For individuals, these changes mean more savings through reduced tax liabilities and easier compliance.
As we move forward, the New Income Tax Bill 2025 will probably continue to evolve as it is yet to be passed in parliament. We’ll keep you updated with any fresh developments. So, stay tuned!
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Still Curious?
If you are like us, who likes to analyse a little more or check out content in different formats, well you are in luck. Below you can find some suitable content we found.
Finshots – The Budget simplified (Blog)
Cleartax – Budget 2025 Highlights: PDF Download, Key Takeaways and Important Points (Blog)
Business Standard – All about the New Income Tax Bill 2025 (YT Video)
Note: We don’t have any affiliation with them. We are sharing links only for educational purposes. The opinions expressed by them belong solely to them and do not reflect the views of Vrid.
