The new budget will take effect from tomorrow, April 1, 2025, initiating the implementation of announcements made by the government in the budget presentation on February 1. While benefits like income tax exemptions and subsidies are applied immediately, infrastructure and social welfare schemes will take time due to implementation processes.
Key Changes Effective from April 1, 2025:
1. Change in Tax Slabs: New Bracket for ₹20-24 Lakh Income
What’s Changed: Under the new tax regime, income up to ₹12 lakh is now tax-free. For salaried individuals, this exemption increases to ₹12.75 lakh with a standard deduction of ₹75,000. Additionally, a new 25% tax slab has been introduced for incomes between ₹20-24 lakh.
Impact: Previously, a 30% tax applied to incomes above ₹15 lakh. Now, this threshold is raised to ₹24 lakh, reducing the tax burden on middle and upper-middle-income groups.
2. Higher TDS Exemptions: Relief on Rent and Interest Income
What’s Changed:
- TDS on Rent: The exemption limit has increased from ₹2.4 lakh to ₹6 lakh.
- Interest Income for Senior Citizens: TDS exemption on bank FD interest has doubled from ₹50,000 to ₹1 lakh.
- Professional Services: TDS exemption limit increased from ₹30,000 to ₹50,000.
Impact: Reduced TDS burden for individuals, improving cash flow.
3. Increased TCS Limit: More Savings for Students Studying Abroad
What’s Changed:
- The Tax Collected at Source (TCS) exemption for overseas education expenses has increased from ₹7 lakh to ₹10 lakh.
- No TCS applies if the amount is taken as an education loan from a financial institution.
Impact: Families sending money for education abroad will benefit from lower deductions, making transactions smoother.
4. Extended Time for Filing Updated Returns
What’s Changed: Taxpayers can now file updated returns up to 48 months after the assessment year, compared to the previous 24-month window.
- 60% additional tax on returns filed between 24-36 months.
- 70% additional tax on returns filed between 36-48 months.
Impact: More time to correct errors in tax filings, encouraging voluntary compliance.
5. Capital Gains Tax on ULIPs with High Premiums
What’s Changed:
- If ULIP (Unit Linked Insurance Plan) premiums exceed ₹2.5 lakh annually, they will be treated as capital assets.
- Tax Rates:
- 12.5% for holdings over 12 months (Long-Term Capital Gains – LTCG).
- 20% for holdings under 12 months (Short-Term Capital Gains – STCG).
Impact: High-income earners will now pay taxes on ULIP benefits, preventing misuse as a tax-free investment.
6. Custom Duty Adjustments: Prices of 150-200 Items Affected
What’s Changed: Custom duties have been revised, impacting product prices.
Items Becoming Cheaper:
- Imported cars above $40,000 or with an engine capacity over 3,000cc.
- Motorcycles (CBU units) with an engine capacity under 1,600cc.
- 36 life-saving medicines.
- Electric vehicles (EVs), with duty removal on 35 capital goods for battery manufacturing.
- 28 capital goods exempted from duty for mobile phone battery production.
Items Becoming Costlier:
- Smart meter solar cells.
- Imported shoes and candles.
- Imported boats and other vessels.
- PVC flakes.
Conclusion
These budget changes aim to provide tax relief, encourage compliance, and impact various industries. While direct tax benefits are immediate, long-term projects and price changes will evolve over time. Stay updated on further announcements by the Central Board of Indirect Taxes and Customs (CBIC).