The budget speech introduces several income tax reforms aimed at relieving the middle class, simplifying procedures, and encouraging voluntary compliance. Below are the key highlights:
Table of Contents
TogglePersonal Income Tax Reforms
- A new income tax regime with revised slabs and lower tax rates to reduce the burden on the middle class.
- No income tax on income up to ₹12 lakh (excluding special rate income like capital gains).
- Salaried taxpayers benefit from a ₹75,000 standard deduction, raising the exemption limit to ₹12.75 lakh.
- New tax slabs:
- ₹0–4 lakh: Nil
- ₹4–8 lakh: 5%
- ₹8–12 lakh: 10%
- ₹12–16 lakh: 15%
- ₹16–20 lakh: 20%
- ₹20–24 lakh: 25%
- Above ₹24 lakh: 30%
- A tax rebate ensures zero tax liability for incomes up to ₹12 lakh.
- Sample savings: A taxpayer earning ₹12 lakh saves ₹80,000, while one earning ₹25 lakh benefits by ₹1,10,000.
Rationalization of TDS/TCS
- Fewer TDS rates and higher threshold limits for better clarity.
- Senior citizen interest exemption doubled from ₹50,000 to ₹1 lakh.
- TDS on rent threshold increased from ₹2.4 lakh to ₹6 lakh.
- TCS on remittances under LRS increased from ₹7 lakh to ₹10 lakh.
- No TCS on education-related remittances from loans.
- TCS on sale of goods removed; higher TDS now applies only to non-PAN cases.
Encouraging Voluntary Compliance
- Updated return filing window extended from 2 years to 4 years.
- Additional tax for late updated returns:
- 60% (24–36 months), 70% (36–48 months).
- Mandatory reporting of crypto-asset transactions.
- Self-occupied property tax exemption for up to two properties.
Reducing Compliance Burden
- Charitable trusts/institutions: Registration period extended from 5 to 10 years.
- Minor defaults won’t lead to trust registration cancellation.
- Higher TDS/TCS for non-filers removed.
Ease of Doing Business
- New 3-year safe harbor scheme for international transactions.
- Expanded safe harbor rules to reduce litigation.
- Withdrawals from National Savings Scheme (NSS) & NPS Vatsalya accounts to be tax-exempt.
- All tax processing, including appeals, to be fully digitalized.
Employment and Investment
- Presumptive taxation for non-residents servicing electronics manufacturing companies.
- Tonnage tax extended to inland vessels.
- Startup benefits extended by 5 years (until 1.4.2030).
- Tax incentives for ship-leasing, insurance, and treasury centers in IFSC.
- Sovereign Wealth & Pension Fund investment deadline extended to 31.3.2030.
Impact & Revenue Considerations
These reforms aim to enhance taxpayer convenience, boost disposable income, and stimulate investment, creating a more business-friendly environment. The new income tax bill is designed for clarity and efficiency, reducing the current law’s complexity by nearly 50%. As a result, the government is forgoing an estimated ₹1 lakh crore in direct tax revenue.