Income Tax Budget 2025 Highlights: Who is likely to benefit most from FM Nirmala Sitharaman’s tax slab change?

Income Tax Budget 2025 Highlights: Thank you for staying with Livemint for the latest on the Union Budget announcement by Finance Minister Nirmala Sitharaman. This blog is now closed. Find other Budget related stories, opinions and developments here

Income Tax Budget 2025 LIVE: Union Finance Minister Nirmala Sitharaman's Budget 2025 announcement is also for senior citizens. The government proposed its plans to double the threshold for subjecting interest to TDS for senior citizens on the interest earned. 

This means that such deposit holders may not need to file self-declaration forms (Form 15(H)) annually with the bank, society or post office, requesting them not to deduct tax on interest if the amount is below that threshold. 

Currently, financial entities, including banks, deduct the tax if the self-declaration is not filed, and the deposit holder is then required to claim a refund when the total income is below the taxable limit. 

Income Tax Budget 2025 LIVE: According to the new budget proposal, the Indian government has taken a stricter stance on crypto taxation. Here are the four things crypto investors need to look for - 

1. Mandatory Reporting: Investors and entities dealing in VDAs must submit transaction details to the tax authorities.

2. Inclusion in Undisclosed Income: Crypto trading profits can now be categorized under undisclosed income, which may lead to additional scrutiny.

3. High Tax, No Set-Offs: Gains from crypto transactions remain taxed at 30%, with no provision to offset losses against other income. Additionally, a 1% TDS on every trade (Section 194S) continues to apply.

4. Block Assessment Timeline: The time limit for assessing undisclosed income related to crypto transactions is 12 months from the end of the quarter in which the search or requisition was executed.

Income Tax Budget 2025 LIVE: The Indian government has taken a stricter stance on crypto taxation norms in the Budget 2025 announcement. The government has introduced a new Section-285BAA under the Income Tax Act of 1961, which makes it mandatory for investors to furnish details of their crypto transactions. 

They also included virtual digital assets (VDAs) into the undisclosed income category, putting crypto gains in the same category as gambling and horse racing earnings for tax purposes.

Income Tax Budget 2025 LIVE: According to the Budget 2025 announcement, the government proposed to increase the threshold for TCS under the Reserve Bank of India's (RBI) Liberalized Remittance Scheme (LRS) to ₹10 lakh from the existing level of ₹7 lakh. 

This is aimed at reducing the tax burden for frequent international transactions from abroad to India. 

Income Tax Budget 2025 LIVE: According to the Union Budget 2025 announcement, the government proposed to exempt TCS from Education Remittance Specified Institution. This will make it easier for students to finance overseas education when funded through a loan from a recognized financial institution. 

Income Tax Budget 2025 LIVE: Union Finance Minister Nirmala Sitharaman, on February 1, announced that the government seeks to extend the window for filing an updated return to four years, compared to its current limit of two years. 

This means if a taxpayer realises that they have failed to report an income of ₹1 lakh on which a tax of ₹30,000 and interest of ₹10,000 are payable, they now have the option to file an updated return, with the additional tax payment varying depending on the timing of the filing from the relevant assessment year.

Income Tax Budget 2025 LIVE: The standard deduction is a flat amount that is deducted automatically from a taxpayer's yearly income. This reduces the total taxable income lowering the overall tax liability for a financial year. 

Income Tax Budget 2025 LIVE: According to the Budget FAQs, In the case of a director of the company or a person who has a substantial interest in the company, these amenities and benefits will continue to be treated as perquisites (benefits) irrespective of the salary earned.

Therefore, the limit on salary specified shall only apply to an employee who is not a director nor a person with a substantial interest in the employer company. 

Income Tax Budget 2025 LIVE: The Union Budget 2025 highlighted two changes proposed to specify the limit on salary - 

1. The amenities and benefits (in general) received by employees with a salary below a certain limit would be exempt from being treated as a perquisite (benefits). 

The limits, currently at ₹50,000 per annum, can now be prescribed by the Central Government. 

2. 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 (benefit). 

Such limits, presently at ₹2,00,000 per annum, can now be prescribed by the Central Government. 

Income Tax Budget 2025 LIVE: The current provisions provide an upper limit on salary beyond which the following will be treated as perquisites (benefits) - 

1. Amenities and benefits (in general) received from employers.

2. The expenditure incurred by the employer for travel outside India on the medical treatment of an employee or his family member. 

These are proposed to be amended under section 17 by the upcoming Finance Bill 2025.

Income Tax Budget 2025 LIVE: Taxpayers should consider switching to the new tax regime if - 

1. You don’t want the hassle of managing multiple deductions.

2. You are in a higher tax bracket and benefit from lower slab rates.

3. You prefer immediate liquidity over long-term tax savings. 
 

Taxpayers should consider sticking with the old regime if - 

1. You rely on major deductions like HRA, home loan interest, and 80C savings.

2. You are comfortable with tax planning and want to maximise exemptions.

3. You want to build wealth through tax-efficient investments.

Income Tax Budget 2025 LIVE: As the government aims to simplify the direct taxation process in India to provide relief to the middle-class and lower-income individuals, people are starting to question whether or not they should shift to the new tax regime. 

The new tax structure is designed to be easier to understand, with fewer complexities, and exemptions. More predictable, with a clear slab-based taxation with easy-to-calculate tax savings. Faster compliance as it reduces the need for paperwork and fewer deductions to calculate. 

If you prefer simplicity, the new regime works if you don’t claim many deductions and prefer a straightforward tax system. But if you rely on deductions like claim home loan interest, LIC premiums, EPF, NPS, or tuition fees then the old regime may still offer better savings potential.

Income Tax Budget 2025 LIVE: The government aims to attract all individual taxpayers to shift to the simplified new tax regime from the old tax regime. The Union Budget 2025 announcement did not make any changes to the tax rates or slabs in the old tax regime, making it unattractive. 

On the other hand, they made individuals who earn up to ₹12 lakh per annum and do not pay any income tax from sources such as their salary under the newly proposed regime. 

Income Tax Budget 2025 LIVE: Clause (10D) of Section 10, which is proposed to be amended, is set to provide exemption on proceeds received from life insurance policies issued by the insurance intermediary office located in IFSC. 

Exemptions will be without any condition on the premium amount, i.e., ₹2,50,000 for ULIPs and ₹5,00,000 for other policies. However, the premium payable for any of the year during the term of the policy should not be more than 10% of the capital sum assured. 

Income Tax Budget 2025 LIVE: According to the budget announcement, a rebate is a deduction from tax which is available to taxpayers having income up to ₹12 lakh under the new regime. 

Marginal relief ensures taxpayers who have income marginally higher than ₹12 lakh per year do not pay tax more than the income in excess of ₹12 lakh. 

Income Tax Budget 2025 LIVE: According to the proposed new tax regime, no rebate will be available for income from capital gains or lotteries or any other income on which a special rate has been provided in the Income Tax Act. 

The rebate will only be available on the tax payable as per slabs under section 115BAC. 

Income Tax Budget 2025 LIVE: According to the budget announcement, the total income till which marginal relief is available is nearly ₹12,75,000 per year.

Income Tax Budget 2025 LIVE: According to the budget announcement, the maximum rebate available is ₹60,000, which is there for a taxpayer having an income of ₹12 lakh annually as per the new proposed slabs.

Income Tax Budget 2025 LIVE: Assuming your income is ₹12.10 lakh annually, the total tax liability will be ₹61,500 (without marginal relief). 

As per the new proposal, the tax liability will be compared with the total income exceeding the rebate level, which means subtracting ₹12 lakh from ₹12.10 lakh, i.e., ₹10,000 is the excess income. 

The marginal relief will be calculated by deducting the income exceeding ₹12 lakh from that total tax liability, i.e., ₹61,500 - ₹10,000 = ₹51,500. 

Therefore in such cases, the rebate via a marginal relief is ₹51,500, making the tax liability of an individual ₹10,000 for the year. 

Income Tax Budget 2025 LIVE: Let us assume you earn ₹12.10 lakh annually. The first thing to do is calculate the total tax amount applicable according to the slab. 

The initial income of ₹4 lakh will be charged nil tax under the basic exemption. Tax on the subsequent amount of ₹4 lakh (from 4 to 8 lakh) will be 5% of 4 lakh is ₹20,000. 

The tax on the subsequent amount of 4 lakh (from 8 to 12 lakh) will be 10% of the 4 lakh, i.e., ₹40,000. Now, the remaining tax on the balance amount of ₹10,000 is 15%, i.e., ₹1,500. 

Adding all of them up makes ₹61,500 (Total tax liability).

Income Tax Budget 2025 LIVE: According to the budget announcement, people earning up to ₹12 lakh will have “Zero tax” liability. 

Individuals earning ₹12.10 lakh will have to pay ₹10,000 as tax liability after the marginal relief is imposed. Earlier, they would have paid ₹61,500 without the relief tax cut. 

With an income of ₹12.50 lakh annually, earlier, you would have been mandated to pay ₹67,500 as tax; as per the new proposed tax regime, you would have to pay ₹50,000 with the relief imposed. 

People earning ₹12.70 lakh will have to pay ₹70,000 as tax liability with the marginal relief imposed, compared to the earlier tax of ₹70,500. 

Lastly, people with an income of ₹12.75 lakh will pay ₹71,250 without any marginal relief applicable to their income, according to the new tax proposal. 

Income Tax Budget 2025 LIVE: According to the proposed new tax regime, a person earning ₹12.10 lakh annually will be subject to a tax liability of ₹61,500, as per the slab rate. 

However, a “marginal relief” provided ensures that the individual earning marginally over ₹12 lakh a year is required to pay only a certain amount of tax equal to the amount of income above ₹12 lakh. 

This brings the person's carry-home amount to ₹12 lakh with a tax payable of ₹10,000 per year. 

Proposed personal income tax cuts for FY 2025-26 to enhance middle-class disposable income and stimulate demand in the automotive market, according to an EY report on Union Budget 2025 announced by Finance Minister Nirmala Sitharaman.

• In the new regime under section 115BAC(1A), marginal relief is available to only resident individuals who have income marginally above ₹12 lakh. 
• For example, for a taxpayer with an income of ₹12.10 lakh, in the absence of marginal relief, the tax works out to be ₹61,500. 
• However, due to marginal relief, the amount of tax to be actually paid is ₹10,000.

Changes in slab, rates, and rebate will make up to ₹1 lakh crore available to taxpayers.

• In the last AY 2024-25, around 8.75 crore individuals filed their ITRs. 
• The change in rates and slabs will benefit all such assessees who were paying tax under the new tax regime.

Delhi assembly elections will be test for the BJP, and hence union budget's tax benefits are ushered in on assembly poll eve. The tax sops and the announcement of the 8th Pay Commission may help BJP assuage perceived angry sentiment, writes Ranjit Bhushan. You can read the full analysis here

• Yes, a standard deduction of ₹75,000 is available for taxpayers in the new regime. 
• Taking the standard deduction of ₹75,000 in account, a salaried taxpayer will not be required to pay any tax for income up to ₹12.75 lakh.

"The government has brilliantly treaded the fine line between tax breaks, with exemption up to inr 12L and managing fiscal deficit ( est. 4.4% of GDP) vs growth expectations. There has been tremendous focus on critical industries like exports ( setting up of Bharat Trade Network ), exemption of duty for battery manufacturers, FDI limit increase in insurance, completion of stalled housing projects. Although, there were expectations on a few announcements related to the defense sector, the overall budget is deep rooted in building the foundation for the next S curve in growth," said Devam Sardana, Business Head, Lemonn.

Soumya Sarkar, Co-Founder, Wealth Redefine belives the Budget was a commendable step toward tax simplification and easing the financial burden on taxpayers.

"The increase in the income tax exemption limit to ₹12 lakh will provide significant relief to the middle class, boosting disposable income and fostering savings and investments. Additionally, the revised tax slabs and reduced compliance burden for businesses will enhance financial planning and encourage voluntary compliance," Sarkar noted.

"The rationalisation of capital gains tax on securities for both residents and non-residents promotes a more level playing field in investment markets. Furthermore, the extension of tax incentives for startups and infrastructure investments until 2030 will support long-term economic growth. However, clarity on certain provisions, such as the taxation of business trusts and unit-linked insurance policies, remains crucial. Overall, this budget aligns with the vision of financial inclusion and economic resilience, paving the way for a more investor-friendly environment," Sarkar added.

The new tax regime is applicable to:

• any person, being an individual or Hindu undivided family or associations of persons (other than a cooperative society), or body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2. 
• Thus, the change in tax slabs will benefit all the salaried taxpayers.

• The limit of total income for NIL tax payments in the new tax regime has been increased to ₹12 lakh in this budget provided the taxpayer files ITR to avail the rebate.
• The earlier the limit of income for nil tax payment was ₹7 lac. 
• By increasing this limit to ₹12 lakh around one crore assessees who were earlier required to pay tax varying from ₹20,000 to ₹80,000 will be now paying nil tax.

• The benefit of no income tax is available only in the new tax regime, which is now the default regime. 
• Taxpayers looking to avail the benefit of rebate under proposed provisions of new tax regime, need only to file their returns with no additional steps.

In the new tax regime, individuals earning up to ₹12 lakh will pay no tax, while those earning ₹18 lakh and ₹25 lakh will see savings of ₹70,000 and ₹1.1 lakh, respectively. The regime thus favours younger taxpayers by increasing disposable income, writes Tina Edwin. Read how and why here

The ‘new regime’ provides for concessional tax rates and liberal slabs. However, no deductions are allowed in the new regime (other than those specified for e.g. 80JJAA, 80M, and standard deduction).

“The Union Budget 2025 delivers a strong push to the real estate sector through a well-rounded approach that balances affordability, investment incentives, and project completion. By increasing the income tax exemption limit, homebuyers now have greater purchasing power, enhancing demand for residential properties. The move to allow tax benefits on two self-occupied properties instead of just one encourages multiple home ownership, making real estate a more attractive long-term investment avenue," according to Chandresh Vithalani, Partner at Palladian Partners.

Mathew Muthoottu, Managing Director, Muthoottu Mini Financiers feels that Raising the nil tax slab to ₹12 lakh is a significant relief, giving the middle class more spending power and driving consumption. "As India moves towards ‘Viksit Bharat,’ the budget’s focus on empowering youth, women, and farmers will help ensure sustainable and inclusive development. These measures, along with continued efforts to improve the ease of doing business, will be instrumental in supporting small businesses and rural entrepreneurs, pushing India’s economic momentum forward," he said.

Ashish Singhal, Co-founder of CoinSwitch and Lemonn thinks that Budget 2025 introduces significant measures aimed at boosting economic growth and providing relief to taxpayers — especially the middle class.

"Zero income tax for up to ₹12 lakh of earnings, and further rebate in taxes, is a major relief for the middle class, and we welcome it. It could improve disposable income, stimulating consumer demand and contributing to overall economic momentum. The rationalization of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) thresholds is a commendable step towards simplifying the tax regime, reducing compliance burden for individuals and businesses alike. These initiatives reflect a balanced approach to fiscal policy, addressing both the need for revenue generation and the importance of taxpayer welfare," Singhal feels.

“Budget 2025 maintains fiscal discipline while laying a foundation for growth. The ₹12 lakh tax exemption is a welcome relief for the middle class, potentially driving consumption. Allowing 100% FDI in insurance is a strong reform. While the 10.1% nominal growth target is conservative, fiscal prudence is key. With capacity utilization at 70-75%, private capex may take time, making early government spending crucial. Balancing growth and demand will be essential to sustaining economic momentum and investor confidence," Rashesh Shah, Chairman & CEO of Edelweiss.

"Raising the tax exemption limit to ₹12 lakh and revising tax slabs provide much-needed relief, increasing middle-class spending power. This, in turn, fuels demand for products from MSMEs and the agricultural sector, creating a positive demand-supply cycle that reinforces economic momentum. By addressing these key areas while maintaining fiscal discipline through controlled expenditure, the budget strikes a fine balance—ensuring growth without compromising stability," feels Kushal Rastogi, Founder & CEO of Knight Fintech.

"The rationalisation of the TDS regime was a need of the hour. The purpose of the TDS regime has evolved from a tax collection mechanism to a system that creates an audit trail for transactions. With higher TDS thresholds and simplified slabs, businesses will have more cash-flow and there will be a reduction in compliance complexity," said Gouri Puri, Partner at Shardul Amarchand Mangaldas and Company.

Anuj Sethi, Senior Director at Crisil Ratings believes the Union Budget's income tax cuts will drive consumer spending and sectoral growth.

"The proposed changes to the personal income tax slab rate under the new regime will enhance discretionary income and boost spending opportunities for consumers in sectors such as FMCG, textiles, consumer durables and automobiles, especially two-wheelers. Consumers will also have the flexibility to move up the value chain and enhance premiumisation quotient in their buying. Overall, the tax cuts will enhance financial flexibility of consumers and can benefit sales growth of consumer-oriented sectors," Sethi said.

Dr Subir Verma, Director – FORE School of Management feels the Budget is dedicated to accelerating growth and sustaining our economy towards 'Viksit Bharat.’ 

“The proposal to remove TCS on education remittances funded through loans will significantly alleviate financial burdens for families, making global education more accessible and encouraging students to pursue their aspirations without the added tax burden. This move not only supports individual growth but also enhances India's reputation as a hub for skilled talent. Overall, this budget demonstrates a balanced vision for fostering a skilled workforce, driving sustainable economic growth, and empowering the next generation to thrive in a competitive global environment,” he added.

The Tech Entrepreneurs Association of Mumbai (TEAM) spokesperson feels that overall, this is an inclusive budget focused on empowering those who need it most. 

“The new tax regime, with no income tax up to ₹12.75 lakh, is a much-needed reform, fueling economic growth by empowering the salaried class—our most productive taxpayers. From a tech perspective, the Union Budget 2025 reinforces India's commitment to its AI and startup ecosystem, recognizing its vital role in innovation, job creation, and economic growth,” the statement added.

“Extension in the look back period for filing the updated return is a key step towards promoting voluntary compliance. On many occasions taxpayers discover non-compliance post the passage of time for filing a belated return. The updated return facility allows the taxpayer a window to address past infractions,” feels Gouri Puri, Partner at Shardul Amarchand Mangaldas and Company.

"The proposal to relax TCS provisions for decriminalisation, similar to the July 2024 TDS payment deadline changes, will reduce legal risks for travel agencies, tour operators and hotels collecting TCS on foreign travel packages and high-value bookings. It will ease the compliance burden, enabling businesses to focus on growth, streamline high-value transactions for tourists, and help attract more investment in the travel and hospitality sector, making India's tourism industry more competitive," feels Poonam Upadhyay, Director at Crisil Ratings.

Zarin Daruwala, CEO, India and South Asia at Standard Chartered Bank feels FM Nirmala Sitharaman delivered a "very solid budget that focusses on accelerating growth, by increasing consumption, providing a boost to employment and the MSME sector, while remaining fiscally prudent".

"The lower income tax outgo will give a fillip to consumption and incentives to labour intensive sectors will boost employment. A slew of measures to the MSME sector is encouraging. The infrastructure buildout has been widened which have multiyear multiplier effects and aid employment. These measures will surely put India on course to becoming a $4 trillion economy by March 2026," Daruwala added.

Sudipta Roy, MD and CEO of L&T Finance  thinks the Budget is “well-balanced” and managed to “hit the right balance between the need for a consumption stimulus and structural support” for sustainable economic growth “despite global headwinds”.

“Proposed income tax reliefs for the middle-class population should bring in plenty of cheer and boost consumption. At the same time, CAPEX thrust has been maintained in the budget with targeted support to critical sectors. The economy thus gets both consumption and CAPEX push to strengthen growth momentum in the year,” he added.

Suman Chowdhury, Executive Director and Chief Economist at Acuité Ratings & Research felt the dominant theme in Budget 2025 was to provide a significant boost to consumption in the Indian economy through personal income tax cuts and higher disposable incomes of the middle class. 

“However, Acuité Research also believes that the budget has mooted a slew of measures to expedite private sector investments, a critical element towards Viksit Bharat 2027. Overall, we believe Budget 2025 is a major consumption boosting budget … At the same time, it continues to lay the building blocks required to take the Indian economy towards Viksit Bharat 2047,” Chowdhury added.