Budget 2025: 15 Key Income Tax Changes Every Individual Taxpayer Must Know

Finance Minister Nirmala Sitharaman, in her Budget 2025 speech on February 1, announced significant revisions to income tax slabs and rates to create a more progressive taxation system. These changes aim to provide relief to middle-class taxpayers while promoting savings and investment.

Here are the 15 most important changes individual taxpayers should be aware of under the Finance Bill, 2025:

1. New Income Tax Slabs for FY 2025-26

The revised tax slabs under the new tax regime for individuals and HUFs (excluding NRIs and cooperative societies) are:

Income Range (Rs. )	Tax Rate (%)
Up to Rs. 3,00,000	Nil
Rs. 3,00,001 to Rs. 7,00,000	5%
Rs. 7,00,001 to Rs. 10,00,000	10%
Rs. 10,00,001 to Rs. 12,00,000	15%
Rs. 12,00,001 to Rs. 15,00,000	20%
Above Rs. 15,00,000	30%

These rates will apply unless an individual opts out under Section 115BAC(6)​.

Get a Copy of Direct Taxes Law and Practices Including Tax Planning with Free E-Book Access, Click Here

Read More: [BREAKING] No Income Tax upto Rs. 12 Lakh Income, proposes FM during Budget 2025

2. Increased Tax Rebate under Section 87A

The tax rebate limit under the new regime has been raised from Rs. 25,000 to Rs. 60,000 for incomes up to Rs. 12,00,000. This means taxpayers earning up to Rs. 12 lakh under the new regime will effectively pay zero tax​.

3. Increased Savings for Middle-Income Earners

An individual earning a taxable income of Rs. 25 lakh under the new regime can save up to Rs. 1,10,000 in taxes due to the revised slabs and rebates​.

4. Dual House Ownership Tax Benefits Now Allowed

Previously, taxpayers could declare two houses as self-occupied only if one was unused due to work relocation. Now, individuals can claim two houses as self-occupied, even if they live in neither​.

5. Higher TCS Exemption for Overseas Remittances

The Tax Collected at Source ( TCS ) threshold for overseas remittances under LRS has been raised from Rs. 7 lakh to Rs. 10 lakh. This benefits those making foreign investments or planning international travel​.

6. No TCS on Educational Loan Remittances

Remittances for education expenses paid through loans from specified financial institutions are now fully exempt from TCS. Earlier, a 0.5% TCS was applicable on remittances exceeding Rs. 7 lakh​.

7. Extended Time to File Updated Tax Returns

The time limit for filing updated tax returns has been extended from 24 months to 48 months, with additional tax penalties:

• 24-36 months – Additional 60% of tax and interest
• 36-48 months – Additional 70% of tax and interest​.

Get a Copy of Direct Taxes Law and Practices Including Tax Planning with Free E-Book Access, Click Here

8. Higher Deductions for NPS Contributions for Minors

The Rs. 50,000 deduction under Section 80CCD(1B) (National Pension System) has now been extended to contributions made to a minor’s NPS Vatsalya account​.

9. Increased TDS Exemptions on Interest Income

The TDS exemption limit on interest income has been revised:

• For taxpayers (excluding senior citizens): Rs. 40,000 → Rs. 50,000
• For senior citizens: Rs. 50,000 → Rs. 1 lakh
• For other cases: Rs. 5,000 → Rs. 10,000​.

10. Increased TDS Threshold for Rent Paid by Corporates

Corporate tenants paying rent will now face a TDS obligation only for payments above Rs. 50,000 per month, up from the previous annual limit of Rs. 2.4 lakh​.

11. Higher Exemptions on Dividend and Mutual Fund Income

The TDS threshold on dividends and income from mutual funds has been doubled from Rs. 5,000 to Rs. 10,000, offering relief to small investors​.

12. Exemption for Withdrawals from National Savings Scheme (NSS)

Withdrawals from National Savings Scheme (NSS) accounts that were opened before April 1, 1992, will now be fully exempt from taxation. This applies to both principal and interest​.

Read More: Union Budget 2025: Key Highlights

13. Simplified Tax Treatment for ULIPs

• ULIPs exceeding the Rs. 2.5 lakh premium limit will now be taxed as capital gains instead of income from other sources.
• Gains from ULIPs will now be classified as equity-oriented funds, making them eligible for lower tax rates under Section 112A​.

14. Removal of Higher TDS/TCS for Non-Filers

The higher TDS/TCS rates for non-filers of tax returns under Section 206AB and 206CCA have been removed, reducing the compliance burden for taxpayers​.

Get a Copy of Direct Taxes Law and Practices Including Tax Planning with Free E-Book Access, Click Here

15. Two-Year Limit for Provisional Tax Assessments

A new two-year deadline has been introduced for the finalization of provisional tax assessments to prevent unnecessary delays and tax disputes

Additional Important Changes for Individual Taxpayers in Budget 2025

1. Marginal Relief on Surcharge for High-Income Earners

• Marginal relief is available if the surcharge increases the total tax liability disproportionately.
• For incomes exceeding Rs. 5 crore, the surcharge is now capped at 25% instead of 37%.
• This will lower the effective tax rate for ultra-high-net-worth individuals​.

2. Capital Gains Tax Changes for ULIPs and Mutual Funds

• Unit-Linked Insurance Plans (ULIPs) with premiums above Rs. 2.5 lakh will now be taxed as capital assets.
• Equity mutual funds (held for more than one year) will still be taxed at 10% if gains exceed Rs. 1 lakh under Section 112A​.

3. Presumptive Taxation for Small Professionals and Businesses

• The presumptive income threshold under Section 44ADA (professionals) has been raised to Rs. 75 lakh.
• For small businesses under Section 44AD, the limit has increased to Rs. 3 crore, making it easier for SMEs and freelancers​.

4. Increase in Standard Deduction for Salaried Employees and Pensioners

• Standard deduction remains at Rs. 50,000, but for pensioners, the benefit now applies to more categories, including family pensioners.
• Higher exemption limits for pension withdrawals under certain conditions​.

5. Changes in Taxation of Digital Assets (Crypto & NFTs)

• Obligation to Report Crypto Transactions: A new Section 285BAA mandates that crypto exchanges must report all transactions to tax authorities.
• Clarification on Crypto Taxation: Gains from Virtual Digital Assets (VDAs) (e.g., Bitcoin, Ethereum, NFTs) continue to be taxed at 30% with 1% TDS on transactions​.

6. Boost for Startups: Extended Tax Holiday till March 2030

• Startups incorporated before April 1, 2030, can claim 100% tax deduction for three consecutive years out of their first 10 years of operation.
• This extends the previous exemption deadline from March 2025​.

Get a Copy of Direct Taxes Law and Practices Including Tax Planning with Free E-Book Access, Click Here

7. Tax Deduction for Home Loan Interest under Section 80EE Extended

• First-time home buyers will continue to enjoy a Rs. 50,000 deduction on home loan interest under Section 80EE if the property value is within the affordable housing category.
• Affordable Housing Definition Expanded, making more buyers eligible for this deduction​.

8. Higher Deduction for Medical Insurance under Section 80D

• Senior citizens can now claim up to Rs. 75,000 as a deduction under Section 80D (previously Rs. 50,000) for health insurance premiums.
• For non-senior taxpayers, the deduction remains Rs. 25,000 per year​.

9. Simplification of Tax Treatment for Charitable Donations

• New process for verifying donations under Section 80G.
• Charitable organizations must register their details, ensuring taxpayers get verified deductions without compliance hassles​

To Read the full text of the Financial Bill CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates