The Union Budget 2025 introduced a series of major changes in the Indian tax landscape, applicable from 1st April 2025. These updates significantly impact individuals, startups, and businesses — with revised income tax slabs, increased thresholds for TDS and TCS, and extended exemptions for start-ups and IFSC units.
Here’s a comprehensive breakdown of the key changes and what they mean for you:
1. Revised Income Tax Slabs (New Tax Regime)
Under the default New Tax Regime (Section 115BAC), income tax slabs have been revised for FY 2025-26 onwards:
- 0%: Income up to ₹4,00,000
- 5%: ₹4,00,001 – ₹8,00,000
- 10%: ₹8,00,001 – ₹12,00,000
- 15%: ₹12,00,001 – ₹16,00,000
- 20%: ₹16,00,001 – ₹20,00,000
- 25%: ₹20,00,001 – ₹24,00,000
- 30%: Above ₹24,00,000
🔍 Note: The Old Tax Regime remains optional and unchanged.
2. Higher Rebate Under Section 87A
The rebate limit under the New Tax Regime has been increased to ₹60,000 (from ₹25,000). This means individuals earning up to ₹12,00,000 annually will have zero tax liability under the new regime.
The rebate for the Old Regime remains unchanged at ₹12,500 (up to ₹5 lakh income).
3. Increased TDS Thresholds
Multiple TDS sections now have higher deduction limits, reducing unnecessary withholding and easing compliance:
| Section | Nature of Payment | Old Threshold | New Threshold |
| 193 | Interest on Securities | NIL | ₹10,000 |
| 194A | Interest (Senior Citizens) | ₹50,000 | ₹1,00,000 |
| 194A | Interest (Others – Banks) | ₹40,000 | ₹50,000 |
| 194A | Interest (Others – Non-Banks) | ₹5,000 | ₹10,000 |
| 194 | Dividend (Individual Shareholder) | ₹5,000 | ₹10,000 |
| 194K | Mutual Fund Units | ₹5,000 | ₹10,000 |
| 194B/194BB | Lottery, Crossword, Horse Race Winnings | Aggregate > ₹10,000/year | ₹10,000 (per transaction) |
| 194D | Insurance Commission | ₹15,000 | ₹20,000 |
| 194G | Lottery Commission/Prize | ₹15,000 | ₹20,000 |
| 194H | Commission or Brokerage | ₹15,000 | ₹20,000 |
| 194-I | Rent | ₹2,40,000/year | ₹50,000/month |
| 194J | Professional/Technical Fees | ₹30,000 | ₹50,000 |
| 194LA | Enhanced Compensation | ₹2,50,000 | ₹5,00,000 |
| 194T | Remuneration to Partners | NIL | ₹20,000 |
- Other TDS sections remain unchanged
4. TCS Changes (Effective April 2025)
| Section | Nature of Transaction | Old Threshold | New Threshold |
| 206C(1G) | Remittance under LRS & Overseas Tour Package | ₹7,00,000 | ₹10,00,000 |
| 206C(1G) | LRS for Education (via Educational Loan) | ₹7,00,000 | Exempt (No TCS) |
| 206C(1H) | Purchase of Goods | ₹50,00,000 | Exempt (No TCS) |
- Other TCS provisions remain unchanged.
5. Capital Gains Tax on ULIPs
Redemption proceeds from ULIPs (Unit Linked Insurance Plans) will now be taxed as capital gains if:
- The premium exceeds 10% of the sum assured, or
- The annual premium is more than ₹2.5 lakhs
This ends the long-standing ambiguity and brings parity with mutual fund taxation.
6. Higher LRS Limit & TCS Relief on Education Loans
- The threshold for TCS on foreign remittances under Section 206C(1G) has been raised from ₹7 Lakhs to ₹10 Lakhs per financial year.
- No TCS will be applicable on remittances for education, if funded through educational loans from specified financial institutions.
- These changes aim to ease compliance and reduce the tax burden on students and families funding overseas education.
7. Updated Return (ITR-U) – 4-Year Filing Window
The time limit for filing Updated Tax Returns (ITR-U) has been extended to 48 months (4 years) from the end of the relevant assessment year.
This move encourages voluntary disclosure of previously missed or under-reported income.
| Time of Filing ITR-U | Additional Tax Payable |
| Within 12 months | 25% of additional tax (tax + interest) |
| Within 24 months | 50% of additional tax (tax + interest) |
| Within 36 months | 60% of additional tax (tax + interest) |
| Within 48 months | 70% of additional tax (tax + interest) |
📌 Applicable from FY 2025-26 onwards
8. Start-up Tax Exemption Extended
Start-ups can now avail 100% tax exemption for 3 consecutive years out of 10 years from the year of incorporation under Section 80-IAC if they are:
- Incorporated on or before 1st April 2030
- Eligible under DPIIT criteria and other prescribed conditions
9. Extended Tax Benefits for IFSC Units
- The sunset date for starting operations to claim tax concessions in IFSC units has been extended to 31st March 2030.
- Under Section 10(10D), the entire maturity amount of a life insurance policy purchased by a non-resident from an IFSC office is fully exempt, with no premium limit.
Final Thoughts
These updates signal a shift toward simplification, transparency, and digital compliance in India’s tax ecosystem. But with so many rule changes across income tax, TDS, TCS, and capital gains — staying compliant is more critical than ever.
