The Union Budget 2025-26 was presented by Finance Minister Nirmala Sitharaman on 1 February 2025, with a focus on economic growth, infrastructure investment, and middle-class tax relief. Several significant changes to income tax slabs, TDS rates, capital gains provisions, and startup benefits have been announced. Here is a structured summary of the key changes relevant to individuals and businesses.
Income Tax Slab Changes (New Regime)
The new tax regime slabs have been revised significantly — the biggest change being that income up to ₹12 lakhs is now effectively tax-free (₹12.75 lakhs for salaried individuals including the ₹75,000 standard deduction), owing to the enhanced rebate under Section 87A.
| Annual Income | New Regime Tax Rate (FY 2025-26) |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Key Direct Tax Proposals
- Section 87A rebate enhanced to ₹60,000 — making income up to ₹12 lakhs effectively tax-free under the new regime.
- TDS threshold on interest income (Section 194A) for senior citizens increased from ₹50,000 to ₹1,00,000.
- TDS on rent (Section 194I) threshold increased from ₹2.4 lakhs to ₹6 lakhs per annum.
- Updated Return (ITR-U) filing window extended from 2 years to 4 years from the end of the relevant assessment year.
- Startup tax holiday under Section 80-IAC extended — eligible startups incorporated up to 31 March 2030 can claim a 3-year tax holiday.
- ESOP taxation for eligible startups — deferred TDS on ESOP continues but extended to a wider category of employees.
Capital Gains Tax Updates
- The capital gains tax changes introduced in the July 2024 budget (STCG at 20%, LTCG at 12.5% on listed securities) remain unchanged.
- Indexation removal for LTCG on property remains — LTCG on property sold after 23 July 2024 taxed at 12.5% without indexation.
- The Budget 2025 proposes to allow taxpayers who acquired property before 23 July 2024 to choose between the old rate (20% with indexation) and the new rate (12.5% without indexation) — whichever is lower — as a relief measure.
GST & Customs Highlights
- No major structural GST rate changes announced — GST Council discussions to continue.
- Customs duty on certain electronic components reduced to support domestic manufacturing under the PLI scheme.
- Basic customs duty on lithium-ion battery components reduced to promote EV manufacturing.
- Export duty on key minerals adjusted to encourage domestic processing.
- Increased budget allocation for infrastructure and digital public services expected to drive GST collections in the year ahead.