Budget 2025- bring in cheers for the middle class

By Shuddhasattwa Ghosh

The Hon’ble Finance Minister on February 01, 2025 presented Union Budget for the fiscal year 2025-26 with a vision which includes uplifting household sentiments and enhance spending power of India’s rising middle class. Taxation reforms stands as a key component of realising the vision of Vikshit Bharat and while a new income tax bill is going to be presented to achieve this, the Finance Minister nonetheless provided relief for the middle class keeping in mind the key pillars of the journey i.e. Democracy, Demography and Demand.

New Income Tax rates:  No change in the tax rate is proposed under the old tax regime. However, as expected, the tax slab rates under the new tax regime has been proposed to be changed as below:

Further, it is proposed to extend the marginal relief to the individuals with taxable income (other than income taxable at specified rates) upto ₹ 12,00,000. This would mean that a salaried individual who has a taxable income of upto ₹ 12,00,000 shall not be required to pay any tax.  

Illustration listing down the savings in tax under the proposed tax rates vis-à-vis the tax rate application for the previous fiscal year:

Rationalising TDS / TCS

Rationalize  Tax Deducted at Source (TDS) by increasing the thresholds, making the process more taxpayer friendly. Some of them are as follows –

In addition to the above, the Finance Minister proposed to increase the annual limit for TDS on rent from ₹ 2,40,000 to ₹ 6,00,000 .

The Budget 2025 has also proposed the following changes under the Tax collection at source (TCS)

1. The threshold on remittances under RBI’s Liberalized Remittance Scheme (LRS) is proposed to be increased from ₹ 7,00,000 to ₹10,00,0000.  
2. The TCS on education loans up to ₹10,00,0000 (from specified financial institutions) will be removed.  Currently, for such loan, TCS is deducted at the rate of 0.5%.
3. Decriminalization of remittance of TCS delay

Increase in the limits on the income of the employees for the purpose of calculating perquisites

Under the existing laws, if an employee whose taxable salary in a financial year is lower than ₹ 50,000 receives any benefit or amenity from the employer, such benefit or amenity is not considered as taxable in the hands of the employee. Similarly, any expenditure incurred by the employer for travel outside India on the medical treatment of an employee or any member of the employee’s family shall not be included in ‘perquisite’, subject to the condition that the gross total income of such employee does not exceed ₹ 2,00,000. These limits of ₹ 50,000 and ₹ 1,00,000 was determined in 2001 and 1993 respectively. It is proposed that the said limit would be revised and shall be notified in due course.

More Time for Taxpayers: The Finance Minister laid emphasis towards the government’s agenda of Sabka Saath, Sabka Vikas, Sabka Vishwas and Sabka Prayas and increasing the time limit of filing the updated returns for any assessment year, from the current limit of two years to four years.

Self-Occupied Property Valuation: The budget provided relief to the taxpayer allowing them to declare the value of two self-occupied properties as nil without there being any underlying conditions to be fulfilled. 

Deduction for contribution made to NPS Vatsalya

NPS Vatsalya subscribers will now receive the same tax benefits as regular NPS subscribers for their contributions under Section 80CCD(1B). 

It is proposed that any income received on partial withdrawal made out of the minor’s NPS account, shall not be included in the total income of the parent/guardian subject to satisfying certain conditions.

Overall, the direct tax proposals should bring much cheer to the middle class, which in turn would reflect in greater consumption and effect a spiral upward for the economy.

The writer is Tax Partner, EY India.