Finance Minister Nirmala Sitharaman announced the Union Budget today, marking her budget speech for the eighth consecutive year. The Union Budget is presented by the government every year and outlines key financial policies and reforms to support the country’s economic growth for the upcoming fiscal year.
The FM delivered major announcements around taxation and sector-specific reforms to boost public welfare and support key sectors.
In this article, we’ll look at some key highlights of Budget 2025.
Budget 2025 Summary
The Finance Minister introduced several measures to support the country’s economic growth. Here’s a summary of the key points of budget 2025:
1. Income Tax Revision
Last year’s union budget revised the income tax slabs under the new regime. The government has made further changes to the tax slab in budget 2025. As per the new rules, income tax will be charged on the following income thresholds if you opt for the new tax regime:
Income tax slabs
Tax rate
Up to Rs. 4 lakhs
Tax-free
Rs. 4 lakhs – Rs. 8 lakhs
5%
Rs. 8 lakhs – Rs. 12 lakhs
10%
Rs. 12 lakhs – Rs. 16 lakhs
15%
Rs. 16 lakhs – Rs. 20 lakhs
20%
Rs. 20 lakhs – Rs. 24 lakhs
25%
Above Rs. 24 lakhs
30%
This move aims to reduce the tax burden on lower and middle-class taxpayers. Under the new rules, taxpayers earning Rs. 15 lakhs annually can save up to Rs. 35,000 in taxes.
2. Increased rebate under section 87A
Another major budget 2025 highlight is the increased rebate available to taxpayers under the new tax regime. FM Sitharaman has increased this limit from Rs. 25,000 to Rs. 60,000. As a result, individuals earning up to Rs. 12 lakhs annually will be eligible for a full rebate, leading to zero tax liability. This will provide added relief to taxpayers, increasing their disposable income and reducing their tax obligations.
3. Extension of deadline for ITR-U
The Finance Minister proposed extending the timeline for filing updated income tax returns from 2 to 4 years. These measures will make it easier for taxpayers to comply with tax regulations, making the process more transparent and efficient. However, while submitting an updated return, taxpayers will have to pay the following additional tax:
ITR-U filing time
Additional tax
Within 12 months from the end of the AY
25% (tax + interest)
Within 24 months from the end of the AY
50% (tax + interest)
Within 36 months from the end of the AY
60% (tax + interest)
Within 48 months from the end of the AY
70% (tax + interest)
4. Arm’s Length Price Scheme
In the Union Budget 2025, FM Sitharaman introduced the government’s new scheme to help businesses determine the arm’s length price for international transactions over a three-year block period instead of reviewing them every year. This initiative aims to simplify transfer pricing regulations and reduce the compliance burden for companies. Additionally, the government has expanded safe harbour rules to help businesses avoid disputes with tax authorities and bring more clarity and stability to international taxation.
5. Tax benefits for contributions made to NPS Vatsalya accounts
The FM also announced that NPS Vatsalya accounts will now enjoy the same tax benefits as regular NPS contributions under Section 80CCD(1B) of the Income Tax Act. This means individuals can claim an additional Rs. 50,000 deduction beyond the standard Rs. 1.5 lakh limit under Section 80C.
6. Section 44BBD
In her budget 2025 speech, the FM proposed the addition of Section 44BBD to the Income Tax Act starting from the Financial Year 2025-2026. The section introduces a special tax scheme for non-residents who provide services or technology to Indian companies involved in electronics manufacturing. Under this scheme, 25% of the payments made to non-residents for such services or technology will be treated as their total earnings for tax purposes. The move aims to boost the country’s electronics industry by bringing in advanced technology and services from abroad.
7. Duty Exemptions on Medicines
FM Nirmala Sitharaman announced that 36 lifesaving medicines will be fully exempt from Basic Customs Duty (BCD) to help reduce costs for patients, especially those with cancer, rare diseases, and chronic conditions. Additionally, 6 other lifesaving medicines will have a reduced 5% customs duty. The government will also allow pharmaceutical companies that run patient-assistance programs to import medicines duty-free, as long as they’re provided for free to patients.
Wrapping up
From tax revisions and increased rebates to unveiling new schemes like the arm’s length price scheme, these budget 2025 key highlights boost economic growth and development. If you want to invest in promising sectors or start a business to leverage these new schemes, finance your expenses comfortably with Tata Capital’s wide range of loan offerings.
04 February 2025
4 mins read
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