The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman on 1st February 2025, focused on tax relief, economic growth, infrastructure development, and social welfare. Here are the major announcements and reforms:
1. Income Tax Reforms: Big Relief for the Middle Class
- No income tax payable up to ₹12 lakh under the new regime. With Standard deduction of Rs. 75000, it comes to nil tax payable on income upto 12.75 lakh.
- Revised tax slabs under the new tax regime:
- ₹4 lakh – ₹8 lakh: 5%
- ₹8 lakh – ₹12 lakh: 10%
- ₹12 lakh – ₹16 lakh: 15%
- ₹16 lakh – ₹20 lakh: 20%
- ₹20 lakh – ₹24 lakh: 25%
- ₹24 lakh and above: 30%
- Extension of the time limit to file updated Income Tax Returns (ITR) from 2 years to 4 years.
2. Tax Deduction at Source (TDS) and Tax Collected at Source (TCS) Reforms
- Rationalization of TDS by reducing rates and increasing threshold limits.
- TDS limit on rent increased from ₹2.4 lakh to ₹6 lakh.
- Doubling of tax deduction limit on interest for senior citizens from ₹50,000 to ₹1,00,000.
- Relaxation of TCS rules similar to the decriminalization of TDS payment delays.
- Removal of TCS on remittances for education purposes funded through loans.
Reduction in TDS/TCS Rates
To streamline tax compliance, certain TDS/TCS rates have been reduced:
Section | Nature of Income | Present Rate | Proposed Rate |
194LBC | Income from investment in securitization trust | 25%-30% | 10% |
206C(1) | TCS on timber and other forest produce | 2.5% | 2% |
206C(1G) | TCS on remittance under LRS for education (financed by loans) | 0.5% after INR 7 lakhs | Nil |
3. Healthcare & Medical Reforms
- 36 life-saving drugs to be fully exempt from Basic Customs Duty (BCD).
- Six medicines to be added to the concessional duty list (5% BCD).
- Establishment of daycare cancer centers in all district hospitals within three years.
- Full BCD exemption for patient assistance programs run by pharmaceutical companies.
4. Customs & Tariff Reforms
- No more than one cess or surcharge to be levied.
- Removal of seven additional tariff rates, leaving only eight rates (including zero).
- Duty exemptions on cobalt powder, lithium-ion battery waste, and other critical minerals.
- Customs tariff structure rationalization to support domestic manufacturing and exports.
- Tariff Classification Adjustments: 178 new tariff entries added and 63 modified or deleted to align with WCO classification.
- Time Limit for Provisional Assessments: A two-year limit has been introduced for finalizing provisional assessments, extendable by one more year under specific conditions.
- Voluntary Revision of Entry: Importers/exporters can revise entries post-clearance within a prescribed period, impacting self-assessment and refund claims.
- Refund Claims & Limitation Period: Clarity on refund claims arising from revised entries under Section 18A or amendments under Section 149.
- Settlement Commission Changes: Introduction of an Interim Board to handle pending settlement applications and exercise powers of the Settlement Commission.
5. Economic & Fiscal Policies
- Fiscal deficit for FY 2024-25 estimated at 4.8% of GDP.
- Revised estimates for 2024-25:
- Total receipts (excluding borrowings): ₹31.47 lakh crore
- Net tax receipts: ₹25.57 lakh crore
- Total expenditure: ₹47.16 lakh crore
- Capital expenditure: ₹10.1 lakh crore
6. Infrastructure & Urban Development
- ₹1 lakh crore Urban Challenge Fund to transform cities into growth hubs.
- ₹10,000 crore allocated for urban development projects in FY 2025-26.
- Infrastructure and warehousing for air cargo to be enhanced.
- Strengthening electricity distribution and intrastate transmission with additional state borrowing allowances.
7. MSME & Industry Boost
- MSME investment and turnover limits increased by 2.5 times and 2 times, respectively.
- New policies for the footwear and leather industry, creating employment for 22 lakh people.
- Focus on the toy industry, developing skills, clusters, and a sustainable ecosystem.
- National framework for Global Capability Centers (GCCs) in emerging Tier-2 cities.
8. Agriculture & Rural Development
- Agricultural district program for 100 low-productivity districts, benefiting 1.7 crore farmers.
- Makhana Board to be established in Bihar to boost production and processing.
- Increase in Kisan Credit Card (KCC) loan limit from ₹3,000 to ₹5,000.
- 6-year mission for self-reliance in pulses, focusing on tur and masoor.
9. Social Welfare & Education
- Atal Tinkering Labs to be set up in 50,000 government schools.
- Broadband connectivity expansion in all government primary and secondary schools.
- 75,000 additional medical seats to be added over the next five years.
- Sashakt Anganwadi and Poshan 2.0 program to support 8 crore children, pregnant women, and adolescent girls.
10. Energy & Sustainability
- Nuclear Energy Mission targeting 100 GW of nuclear power by 2047.
- ₹20,000 crore R&D initiative for Small Modular Reactors (SMRs).
- Incentives for states to undertake power sector reforms and improve financial health.
11. Aviation & Transport
- Modified UDAN Scheme to include 120 new destinations, benefitting 4 crore passengers.
- Investment in urban transit systems and logistics.
12. Financial Sector & Governance Reforms
- Investment Friendliness Index for states to promote competitive cooperative federalism.
- New mechanism under Financial Stability and Development Council (FSDC) for evaluating financial regulations.
- Jan Vishwas Act 2023 decriminalized over 1,080 legal provisions to improve ease of doing business.
13. Proposed Amendments in GST Laws
1. Trade Facilitation Measures
- Input Service Distributor (ISD) Clarifications: ISD can distribute ITC related to inter-state supplies under reverse charge.
- Definitions Added/Clarified:
- “Local Fund” and “Municipal Fund” defined within “local authority.”
- “Unique Identification Marking” introduced for Track and Trace Mechanism.
2. Changes in GST Provisions
- Omission of Voucher Time of Supply Provisions: Sections 12(4) & 13(4) omitted.
- Correction in ITC Provisions: The phrase “plant or machinery” replaced with “plant and machinery” retrospectively from 1st July 2017.
- Clarification on Credit Notes: Mandates ITC reversal by the recipient for supplier’s tax liability reduction.
- Changes in GST Return Filing (GSTR-2B):
- Omission of the term “auto-generated” for ITC statements.
- New provision to include additional details in ITC statements.
3. Appeal & Penalty Related Amendments
- Pre-deposit for Penalty Appeals: 10% pre-deposit for penalty-only cases in Appellate Authority and Tribunal.
- New Penalties for Track and Trace Mechanism Violations: Introduces penalties under a newly inserted Section 122B.
- Enabling Provisions for Track and Trace Mechanism: New Section 148A for specified commodities.
4. Amendments to GST Schedule III
- Special Economic Zone (SEZ) & Free Trade Warehousing Zones (FTWZ): Supplies within SEZ/FTWZ before export or DTA clearance deemed neither as goods nor services.
- No Refund for Certain Transactions: Clarifies ineligibility for tax refunds on specified transactions.
14. Other Announcements
- New Income Tax Bill to be introduced next week.
- India to become a global toy hub with a dedicated national action plan.
- Boost for food processing in Bihar with the establishment of the National Institute of Food Technology.
- Focus on nutritional security by enhancing access to vegetables and fruits.
- To provide relief to taxpayers, the rebate threshold under the new tax regime has been raised. Now, individuals earning up to INR 12,00,000 will not be required to pay any income tax. Marginal relief is also provided for incomes marginally exceeding INR 12,00,000.
- The time limit for filing updated returns is extended from 24 months to 48 months.
- A new provision requires reporting entities to furnish details of crypto-asset transactions.
- The annual value of self-occupied property will be taken as nil if the owner is unable to occupy it.
- TCS on the sale of specified goods above INR 50 lakhs has been removed.
- Higher TDS/TCS rates for non-filers of returns have been eliminated.
- The definition of “forest produce” has been clarified to reduce disputes.
- Tax benefits for start-ups extended till 01.04.2030 under Section 80-IAC.
- Parity in long-term capital gains tax for resident and non-resident investors.
- The validity of registration for charitable institutions has been increased from 5 years to 10 years.
- Rationalization of taxation on business trusts and investment funds.
- International Financial Services Centre (IFSC) tax incentives extended till 31st March 2030.
- Sovereign wealth funds and pension funds now have an investment deadline extended to 31st March 2030.
- A presumptive taxation regime introduced for non-residents setting up electronic manufacturing units in India.
- The Tonnage Tax Scheme is extended to inland vessels under the Indian Vessels Act, 2021.
- Contributions to the NPS Vatsalya account will now be eligible for deductions under Section 80CCD.
- Withdrawals from the National Savings Scheme (NSS) will be tax-exempt from 29th August 2024.
- Increase in the limits for employee perquisites.
- Exemption for Specified Undertaking of Unit Trust of India (SUUTI) extended till 31st March 2027.
- Rationalization of penalty provisions and time limits for order processing.
- Amendments in block assessment provisions to include virtual digital assets under undisclosed income.
- Service Tax Exemption (Retrospective): Reinsurance services under crop insurance schemes exempted from service tax from April 1, 2011, to June 30, 2017.
Conclusion
The Union Budget 2025 is centered around economic growth, tax relief, infrastructure development, and ease of doing business. With significant reforms in taxation, healthcare, manufacturing, and energy, the government aims to accelerate India’s progress towards a self-reliant and globally competitive economy.
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