Budget 2025 makes New Tax Regime more appealing for Salaried Taxpayers
Union Budget 2025 has made radical changes in the taxation structure that make the New Personal Tax Regime more appealing to salaried taxpayers. The budget 2025 is focused on simplification, compliance with an emphasis on addressing the long-pending concerns of the middle class and salaried people without losing the thread of financial discipline.
Shifting Towards the New Personal Tax Regime
A significant aspect of the budget 2025 is the apparent intention of the government to completely withdraw the Old Personal Tax Regime (OPTR). All the major tax benefits are now proposed under New Personal Tax Regime (NPTR), and therefore, most taxpayers would be benefited. Previously, only 28% of the taxpayers chose OPTR, and the figure is expected to fall sharply because now, without submitting proofs of tax deduction and exemption, individuals would be taxed at lower rates.
Under the new tax regime structure, the tax slab increases by Rs.4 lakh in every block. The tax rates correspondingly increase at a rate of 5% for up to six blocks and go as high as 30%. Here, salaried people earning up to Rs.12.75 lakh now fall in the zero-tax zone under new tax regime.
For example, a taxpayer having an annual income of Rs.25 lakh, who so far had availed NPTR, would benefit by Rs.1,20,000 in tax relief over OPTR. The advantage of NPTR is now improved, as this makes compliance to tax less troublesome and saves on administrative burden.
Relieving Tax Compliance Burden
The budget 2025 further introduces initiatives for reducing administrative hurdles and making compliance more taxpayer-friendly. Therefore, penalties will be suspended from its accrual until a final order by the tax department.
If taxpayers have missed reporting any income, they can now file an Updated Income Tax Return (UITR) with the applicable penalty slabs based on the period of delay, which can be up to four years. By extending ITR-U filing validity, govt is fostering such voluntary compliance and thereby enhancing revenue collection.
Relief Measures for Senior Citizens and Investors
In an attempt to meet the financial needs of senior citizens, the budget 2025 suggests raising the TDS threshold on interest income from Rs.50,000 to Rs.1,00,000, allowing them to earn a higher disposable income.
TDS on dividend will now apply only when the total dividend paid exceeds Rs.10,000, so small and retail investors will have more capital for reinvestment.
Much-needed relief has been introduced in TCS of foreign remittances under the Liberalized Remittance Scheme (LRS) by the government. The permitted annual remittance limit is retained at USD 250,000 but the TCS threshold has been enhanced from Rs.7 lakh to Rs.10 lakh thereby reducing the burden of financial outgo on the individuals remitting funds abroad.
For families funding their children’s higher education abroad, the earlier 0.5% TCS on remittances over Rs.7 lakh added an unnecessary burden. The new budget has done away with TCS on education-related remittances funded through financial institutions, making overseas education more financially accessible.
NPS Vatsalya for Encouraging Retirement Savings
The NPS Vatsalya, conceived the previous year to enable parents/guardians to open an NPS account in minor’s name has also been further incentivized. Tax benefits have been now provided under OPTR, wherein contributions up to Rs.50,000 under NPS Vatsalya will attract tax deductions, thus facilitating long term planning for future generations.
New Benefits for Homeowners
An important change is also on the income from property of house. Taxpayers can claim two houses as self-occupied without any cap. This would be beneficial in cases where people have a second property that they keep vacant because of personal reasons. Thereby, litigation reduces and clarity increases for taxpayers.
Clarity on Taxation of Digital Assets and Insurance Policies
Even though crypto transaction tax rates remain unchanged, VDA brings Virtual Digital Assets into the legal framework and oblige reporting entities to file prescribed details of the transactions in a standard format.
Besides the uncertainty surrounding the tax on ULIPs with high premiums has been clarified. The redemption of such policies will attract a long-term capital gains tax of 12.5%, which will bring in more clarity in policyholders tax liabilities .
New Era – Step Towards a Simplified Tax System
For millions of taxpayers especially middle-class, Budget 2025 goes beyond mere tax relief, it provides financial security in an era of rising costs. By easing tax compliance, simplifying processes, and ensuring a fairer system for taxpayers, the government is working towards a more simplifies tax regime.
Budget 2025 and New Income Tax Act
The budget 2025 also previewed the highly awaited New Income Tax Bill that will approved soon. The latest reforms indicated a shift toward more taxpayer-friendly and compliance-oriented procedure, reinforcing the vision of an efficient and transparent taxation system.
