Union Budget 2025 has introduced various major changes across sectors such as taxation, insurance, and overall economic policy. The growth-oriented budget that focuses on digitalization as well as relief in the form of tax, includes significant reforms that will apply to taxpayers, enterprises, and investors.
Key Features of Union Budget 2025
- New Income Tax Slabs: The new tax slab has been revised to give relief to taxpayers.
- Boost to Insurance Industry: Policy reforms affecting insurance income yields and revenues.
- Economic Growth Indicators: Greater investment in healthcare, technology, and infrastructure industries.
- Digital and AI Use: Preferential treatment to digital payments and artificial intelligence use.
- Tax Relief to Startups and MSMEs: Relief and concessions to small and medium-sized enterprises.
- Greater Emphasis on Green Energy: Relief to green and renewable power.
- Increased Rural Development Allocation: More focus on enhancing agriculture, employment, and infrastructure in rural regions.
- Increased Public Welfare Schemes: Increased allocation to education, health, and women empowerment.
Also Read: HOME LOAN TAX BENEFITS 2024
Income Tax Budget 2025: Major Changes and New Slabs
One of the most eagerly awaited components of the Union Budget 2025 is the change in income tax slabs and rates, which are for salaried individuals and business entities. Below are the most significant changes in the income tax budget for 2025:
New Income Tax Slabs for FY 2025-26
The government introduced new slabs to make taxation more progressive and favorable to middle-class taxpayers:
- Income of ₹3,00,000 and below – No tax (Nil rate)
- ₹3,00,001 to ₹7,00,000 – 5%
- ₹7,00,001 to ₹12,00,000 – 10%
- ₹12,00,001 to ₹20,00,000 – 20%
- Over ₹20,00,000 – 30%
Aside from this, taxpayers under the new system will also be entitled to rebates of up to ₹7,00,000, decreasing their tax burden.
Changes in Tax Insurance and Other Deductions
The government has also changed tax insurance benefits such that they will urge people to invest in financial security.
- Raised Deduction for Life Insurance Premiums: The deduction of life insurance premiums under Section 80C has been increased from ₹1.5 lakh to ₹2 lakh.
- Health Insurance Benefits: Raised deductions under Section 80D for health insurance policies.
- Tax-Free Returns on Certain Policies: Long-term insurance policies will now get tax-free maturity benefits under certain conditions.
- Raised PPF and NPS Benefits: Raised tax savings for retirement investments.
- New Tax Relief for Senior Citizens: Exemptions and deductions were increased in favor of retirees.
Corporate and Budget Income Tax Policies
Union Budget 2025 has brought various corporate tax reforms to enhance investment and industrial growth:
- Cut in Corporate Tax for MSMEs: The rate of tax on small and medium-scale industries reduced from 22% to 18%.
- Tax Holiday for Startups: Startups will benefit from a tax holiday of three years with a higher threshold.
- New Tax Relief on R&D Expenditures: Businesses that incur expenditure on research and development now get 50% tax relief in addition.
- Export-Based Business Relief: Tax relief from special taxes to businesses engaged in export-import.
- More Incentives for Digital Businesses: Relief from taxes on fintech, AI, and cybersecurity-based firms.
Impact on Salaried Employees and Personal Tax Payers
Reduction in the income tax rate and the number of slabs is advantageous to salaried staff in the form of directly augmented disposable incomes for them.
- Relief to Middle-Class Salaried Individuals: The new tax system will benefit salaried people with ₹7-12 lakh annual income by saving on taxes.
- Increased Standard Deduction: Standard deduction for salaried staff is increased from ₹50,000 to ₹75,000.
- Increased Rent and Housing Allowances: Salaried staff drawing House Rent Allowance (HRA) will have increased exemption allowances.
- Increased Deductions for Remote Working Professionals: Special allowances for remote-working professionals.
- Increased Educational Loan Deductions: Increased tax relief for students pursuing higher studies.
Sector-Wise Allocation and Investments
The Union Budget 2025 has also made considerable investments in sectors:
- Infrastructure: ₹12 lakh crore for roads, highways, and smart city projects.
- Healthcare: Increased budget for government hospitals and insurance programs.
- Education & Skill Development: ₹1.5 lakh crore for digital education and skill training based on AI.
- Renewable Energy: Emphasis on solar power and incentives for electric vehicles.
- Agriculture and Rural Development: Incentives and subsidization to farmers for the upgradation of agricultural systems.
- Defense and National Security: Enhanced budgetary support for border defense and defense research.
Tax Reforms to Support Economic Growth
The Union Budget 2025 is framed to give a boost to growth through:
- GST Simplification: New guidelines to facilitate ease of GST compliance for trade players.
- Digital Taxation: Fresh policies for regulating crypto assets and digital transactions.
- Foreign Investment Incentives: Further incentives for foreign direct investment in emerging sectors.
- Simplified Tax Filing Process: Another easier online platform for tax return filing.
- Tighter Measures Against Tax Evasion: Even smarter AI-based detection of tax evasion activities.
Also Read: What is the Interest Rate on Home Loans?
Conclusion
The 2025 income tax budget contains a combination of economic development projects, investment tax incentives, and tax relief. The new system of income tax slabs is revised to bestow minimum burdens of tax to middle-class earners, and the income tax policy of the budget supports corporate growth. Moreover, tax insurance deduction enhances the economic security of taxpayers.
With these developments, individuals and companies need to remain updated and modify their budget techniques to maximize tax benefits and preserve as much as they can in the coming fiscal year.
Sources:
Union Budget official website (https://www.indiabudget.gov.in)
Income Tax Department (https://www.incometaxindia.gov.in)
