Today’s budget proposals for FY 2025-26 brought about a welcome change for middle-income taxpayers, signaling a significant move by the government to forego revenue in the amount of one lakh crore. The Honorable Finance Minister presented the 8th consecutive budget, surpassing the expectations of individual taxpayers with a focus on enhancing the disposable income of the middle class to bolster household sentiment. This budget, aimed at creating a “Viksit Bharat,” seeks to transform six key areas, with taxation being a pivotal component of the proposed changes.
Revised Income Tax Slabs and Regimes
One of the key highlights of the budget was the restructuring of income tax slabs for FY 2025-26. The new proposals aim to provide relief to salaried middle-class taxpayers, offering clarity on the most beneficial tax regime to choose post the Budget 2025 changes. With the introduction of revised income tax slabs, individuals now have a clearer understanding of the tax implications based on their income levels.
The proposed changes include a significant increase in the rebate limit under Section 87A of the Income-Tax Act, 1961, from INR 7 lakh to INR 12 lakh. This adjustment is set to eliminate tax liability for a substantial number of taxpayers, providing much-needed relief. Additionally, the basic exemption limit has been raised from INR 3 lakh to INR 4 lakh, accompanied by a restructuring of tax slabs that now include a new 25% slab for incomes ranging from INR 20 lakh to INR 24 lakh. By pushing the 30% tax slab threshold to INR 24 lakh, up from the previous INR 15 lakh, the government aims to ensure that every taxpayer benefits from these changes, resulting in increased disposable income for individuals across income brackets.
Simplification and Compliance
A key theme emphasized during the budget presentation was the focus on simplifying the tax system to enhance compliance and ease the burden on taxpayers. The changes in tax rates and slabs under the new regime are expected to render the old regime redundant, streamlining the taxation process for individuals. Moreover, the extension of the time period for filing updated returns in certain cases from 2 years to 4 years provides taxpayers with more flexibility to rectify errors in their returns, thereby reducing the risk of penalties and prosecution.
In a bid to further simplify compliance procedures, the Finance Minister announced the extension of decriminalization provisions from TDS to TCS, offering relief to taxpayers and promoting ease of tax compliance. These measures are designed to provide taxpayers with more time and flexibility to ensure accurate tax filings while mitigating the risk of legal repercussions.
The Finance Minister’s announcement regarding the forthcoming introduction of a new income tax bill, half the length of current laws, signifies a step towards greater clarity and reduced litigation in the tax regime. With proposed simplifications like the removal of conditions for exempting two self-occupied houses, the new income tax bill is expected to bring about additional changes aimed at providing taxpayers with a clearer and more efficient tax framework.
In conclusion, the latest budget proposals for FY 2025-26 have been met with widespread approval, particularly among the middle class. The Finance Minister’s efforts to enhance disposable income, simplify tax compliance, and introduce a new income tax bill have set a positive tone for the upcoming fiscal year, offering hope for a more taxpayer-friendly environment. As we look forward to the implementation of these changes, the focus remains on supporting middle-income taxpayers and fostering economic growth through strategic fiscal policies.
