The Union Budget 2025 has introduced significant tax reforms, rationalized provisions, and provided incentives to multiple sectors. This blog provides a detailed comparison of the previous and new provisions along with clear explanations to help taxpayers, businesses, and investors understand these changes effectively.

Lets us understand one by one :

1. What is the ‘New Regime’ in Income Tax?

The New Regime offers concessional tax rates with liberal slabs but does not allow deductions except for specific ones like 80JJAA, 80M, and standard deduction.

2. Are there any changes in the Old Regime?

No, there is no change in slab rates under the Old Regime. It continues with the same rates and deductions as before.

3. What are the revised tax slabs under Budget 2025 (New Regime)?

4. What is the maximum income limit for NIL tax liability?

The new limit is ₹12 lakh, meaning individual taxpayers earning up to ₹12 lakh will not pay any tax due to a rebate of ₹60,000 under the new regime.

Example:

• If someone earns ₹12,00,000, their tax would have been ₹60,000, but it is fully negated by the rebate.

• If someone earns ₹12,50,000, tax is applicable only on the additional ₹50,000 after marginal relief calculations.

5. How does marginal relief work for income slightly above ₹12 lakh?

Marginal relief ensures that a person earning slightly above ₹12 lakh does not pay disproportionately higher tax. It is available up to ₹12.75 lakh.

Example Calculations:

Marginal relief applies only up to ₹12.75 lakh. Beyond that, full tax as per slabs applies. 

6. What are the changes in Standard Deduction?

• Old Regime: No change; standard deduction remains ₹50,000 for salaried individuals.

• New Regime: Standard deduction increased to ₹75,000, providing additional benefits for salaried taxpayers opting for this regime. It makes salaried taxpayers tax free up to 12.75 lakh.

7. How does the new tax regime benefit salaried individuals?

Since Standard deduction increased along with lower tax rates, tax deductions at source (TDS) will also be lower . Salaried individuals will receive more take-home pay starting April 2025, as less tax will be deducted from their salaries. Makes hassle free tax filing by avoiding claim of deductions & submission of proof of documents needed for it.

8. Will special tax rates still apply irrespective of the ₹12 lakh limit?

Yes, special tax rates under Sections 111A and 112A apply irrespective of the ₹12 lakh limit.

For example:

• Long-term capital gains on listed equity shares under Section 112A are taxed at 10% beyond ₹1 lakh, even if total income is below ₹12 lakh.

• Short-term capital gains under Section 111A are taxed at 15% flat rate.

9. What tax change was made for ULIPs (Unit Linked Insurance Policies)?

• Earlier, high-premium ULIPs were taxable, but classification was unclear.

• Now, ULIP proceeds are taxed as capital gains, ensuring clarity.

10. What is the benefit given by Finance Bill 2025 to Non-Residents engaged in the business of providing services or technology to a resident company which is engaged in electronics manufacturing facility including semi-conductor fabrication in India?

• A presumptive taxation regime for such non-residents has been provided.

• Prior to the proposed amendment, a non-resident or a foreign company was liable to tax as business income on the profits from this activity at the applicable rates.

11. Will the scheme be applicable where technical personnel are provided by such Non-Resident?

Yes. This presumptive scheme of taxation is applicable to non-resident providing services or technology. Therefore, where technical personnel are provided by the non-resident, it will be part of presumptive scheme.

12. What are the changes in the limits on the income of the employees for the purpose of calculating perquisites?

There are 2 changes proposed to specify the limit on salary so that:

a. The amenities and benefits (in general) received by employees with a salary below certain limit would be exempt from being treated as perquisite. The limits, presently at Rs 50,000/- per annum under old act, new limit can now be prescribed by the Central Government to increase the exemption.

b. The expenditure incurred by the employer for travel outside India on the medical treatment of an employee with a salary below a certain limit, or for his family member would not be treated as a perquisite. Such limits, presently at Rs 2,00,000/-per annum under old act, new limit can now be prescribed by the Central Government to increase the exemption.

13. What is the Harmonization of Significant Economic Presence applicability with business connection?

• Currently, in the case of a business, income through or from any business connection in India or from significant economic presence in India (which is considered as business connection) is considered as income deemed to be accrued or arising in India.

• An amendment has been carried out to provide that the transactions or activities of a non-resident in India which are confined to the purchase of goods in India for the purpose of export shall not constitute significant economic presence of such non-resident in India.

14. What is NPS Vatsalya Scheme and What are the benefits allowed for NPS Vatsalya in Finance Bill, 2025?

• This scheme allows parents and guardians to maintain NPS account for their minor children.

• Scope of section 80CCD is proposed to be extended:

  Deduction shall now be allowed to the parent/guardian under the old taxation regime for amount deposited in the account of any minor child (upto 2 children) under the NPS-Vatsalya also.

  
  

• Proposed deduction shall be allowed u/s 80CCD(1B).

  
  

• Overall cap of Rs. 50,000 under the said sub-section (cumulatively for self and such minor child (up to 2 children) shall continue as earlier.

15. What are the changes proposed in Finance Bill, 2025 with regard to rates of TDS and TCS?

• Following changes are proposed in the threshold of TDS and TCS:

• No TDS on High Value Cash withdrawals as Section 206AB omitted.

• When will be the changes in TDS/TCS rates applicable?

  These changes will be effective from 01.04.2025 or later notified date. 

17. What changes are proposed in section 206C(1H) in the Finance Bill, 2025?

• Section 206C(1H) provides for collection of tax at source (TCS) on sale of goods at the rate of 0.1% as per present provisions.

• TDS is also applicable u/s 194Q of the Act at the rate of 0.1% of sale consideration at the time of sale of goods. The existing TCS provisions provide that TCS is not to be collected if TDS is deducted on the same transaction. However, at times the collector (seller) is not aware of the fact whether TDS has been done by the buyer on such transaction. This results in both TDS and TCS being applied on the same transaction. It is therefore proposed that provisions of TCS on sale of goods will not be applicable from 01.04.2025 onwards.

18. What are the changes in Rationalization of provisions related to carry forward of losses in case of amalgamation?

• As per Sections 72A and 72AA The accumulated loss of the predecessor entity can be carried forward for 8 assessment years from the previous year in which amalgamation or business reorganization is effected.

• It is proposed that loss of the predecessor entity will be allowed to be carried forward for 8 assessment years from the assessment year in which such loss was first computed for the predecessor entity. Therefore, after amendment the period of carry forward of loss shall be computed from the year of its first occurrence in the hands of the first predecessor entity in which such loss had occurred instead of the previous year in which amalgamation for business reorganization has been effected.

19. What are the changes as regards self-occupied property in Finance Bill 2025?

• Prior to Finance Bill 2025, annual value of a self-occupied property was taken as nil if it was occupied by the owner for his own residence or if he cannot reside therein due to reasons of his business, profession or employment.

• The annual value of a self-occupied property is now to be taken as nil if it is occupied by the owner for his own residence or if he cannot occupy it due to any reason.Therefore, additional condition of not being able to reside therein due to his business or employment or profession has been done away with.

•  For two of such house properties which the owner can specify  as self-occupied now.

For example: If you have one house in Hyderabad wherein your mother is staying and you have another house in Vizag where your staying. And you have 3rd house in Bangalore, which is vacant. After Finance Bill 2025 the annual value of house property can be taken as nil for taxation purposes only if no rent or any other benefit is derived from such property. However, this benefit is in respect of only two properties at the option of the taxpayer. Therefore, the taxpayer can choose two out of the three houses in this example, for determining the annual value of such properties as per section 23(2) of the Act.

20. What are the changes in Updated return (ITR-U) in Finance Bill 2025?

• A taxpayer can file a revised return upto 31st December of the assessment year.

• However, at present if the taxpayer wants to disclose additional income, then he can file an updated return (subject to certain restrictions) upto 24 months from the end of the relevant assessment year on payment of additional income-tax.

• This updated return can now be filed upto 48 months from the end of relevant assessment year by paying following Additional tax payment :

If Filed within 12 months: 25% of tax,

If Filed within 24 months: 50% of tax,

If Filed within 36 months: 60% of tax,

If Filed within 48 months: 70% of tax.

 Along with fees & penalty for not filing within due date.

Conclusion:

The Union Budget 2025 brings historic tax reforms, enhanced incentives, and rationalized compliance measures that benefit individual taxpayers, businesses, and investors alike. With lower tax rates in the New Regime and streamlined TDS & TCS provisions, this budget aims to increase disposable income, promote financial growth, and boost economic stability.

For salaried individuals, the higher standard deduction and tax-free income up to ₹12 lakh provide significant relief.

Overall, Budget 2025 prioritizes economic expansion while ensuring tax relief for millions of taxpayers. As these reforms take effect, individuals and businesses should evaluate their tax strategies to optimize benefits. If you have further questions or need detailed insights, feel free to reach out us!

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Disclaimer: This blog is intended for informational purposes only and should not be considered as financial, tax, or legal advice.

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