Union Budget 2025: Key Taxation Highlights and Implications
The Union Budget 2025, presented by the Finance Minister, introduces significant changes to India's taxation framework, aiming to stimulate economic growth and benefit the salaried middle class.
Revised Income Tax Slabs:
The budget revises income tax slabs under the new tax regime, providing relief to taxpayers:
- Nil Rate: Up to ₹3 lakh
- 5% Rate: ₹3 lakh to ₹7 lakh
- 10% Rate: ₹7 lakh to ₹10 lakh
- 15% Rate: ₹10 lakh to ₹12 lakh
- 20% Rate: ₹12 lakh to ₹15 lakh
- 30% Rate: Above ₹15 lakh
Additionally, the standard deduction has increased from ₹50,000 to ₹75,000, effectively making income up to ₹7.75 lakh exempt from tax after accounting for deductions.
Abolition of Angel Tax:
The government has abolished the "angel tax," which previously applied to investments exceeding the fair market value of shares in unlisted companies, often impacting startups and early-stage businesses. This move is expected to encourage investment in the startup ecosystem.
Capital Gains Tax Adjustments:
Changes to the capital gains tax structure include:
- Short-Term Capital Gains (STCG): Tax rate increased from 15% to 20%.
- Long-Term Capital Gains (LTCG): Tax rate set at 12.5%, with the exemption limit raised from ₹1 lakh to ₹1.25 lakh.
These adjustments aim to streamline the tax system and increase revenue.
Reduction in Tax Deducted at Source (TDS):
The budget proposes lowering TDS rates for various payments to simplify compliance:
- Insurance commission, life insurance policy payments, rent payments, and commission or brokerage payments: Reduced from 5% to 2%.
- Payments by e-commerce operators to participants: Reduced from 1% to 0.1%.
These reductions aim to ease the compliance burden on taxpayers.
Implications:
The revised tax slabs and increased standard deduction are expected to boost disposable income, encouraging consumer spending and investment. The abolition of the angel tax should foster a more favorable environment for startups, while adjustments to capital gains tax and TDS rates aim to simplify the tax regime and enhance compliance.
