The Union Budget 2025-26 presented by Finance Minister Smt. Nirmala Sitharaman introduces a series of reforms in the direct tax regime aimed at simplifying compliance and easing the tax burden on individual taxpayers. With new income‑tax slabs, revised thresholds for TDS/TCS, extended timelines for filing updated returns, normal TDS rates for non‑filers, and simplified provisions for self‑occupied properties, the government’s agenda is clear to create a taxpayer‑friendly framework that supports growth and transparency. Let’s explore the significant personal taxation changes proposed in Budget 2025, in detail:
1. Revised Income Tax Slabs under New Tax Regime (NTR)
Under the new regime, the Finance Minister announced that no income tax will be payable on income up to ₹12 lakh for most taxpayers. In the case of salaried individuals, the threshold is further adjusted to ₹12.75 lakh owing to a standard deduction of ₹75,000.
This marks a significant shift from the earlier threshold levels observed in recent years, thereby providing immediate relief to millions of middle‑class taxpayers. Details of the revised slabs are as follows:
i) Up to INR 4 lakh: Nil
ii) INR 4 lakh to INR 8 lakh: 5%
iii) INR 8 lakh to INR 12 lakh: 10%
iv) INR 12 lakh to INR 16 lakh: 15%
v) INR 16 lakh to INR 20 lakh: 20%
vi) INR 20 lakh to INR 24 lakh: 25%
vii) Above INR 24 lakh: 30%
For senior citizens and super-seniors, alternative thresholds continue to apply as per their age group, but the overall approach is to ease the tax liability for individuals with moderate incomes.
2. Increased TDS/TCS Thresholds
In an effort to reduce the administrative burden on small taxpayers and avoid excessive compliance for low-value transactions, several key thresholds are being revised:
i) TDS on Interest (Section 194A):
The current thresholds for deducting tax on interest payments are being raised. For example, for payments made by banks, cooperative societies, and post offices, the threshold for senior citizens will be increased from ₹50,000 to ₹1,00,000, and for all other cases from ₹40,000 to ₹50,000 (or even ₹10,000 in more sensitive cases).
ii) Fees and Other Professional Payments (Section 194J and 194K):
The threshold for deducting TDS on professional or technical services is proposed to increase from ₹30,000 to ₹50,000. Similarly, for income in respect of units (Section 194K), the minimum triggering threshold is being raised from ₹5,000 to ₹10,000 per annum.
These revisions not only diminish the frequency of TDS/TCS compliance for numerous small payments but also ease the verification process by deductors and collectors.
iii) Rental Income (194I)
Increased from INR 2,40,000 to INR 6,00,000 annually, meaning thereby no TDS for rent receipts of up to Rs 50,000 p.m.
iv) TCS on remittances under LRS
The threshold for TCS on remittances under Liberalised Remittance Scheme (LRS) is proposed to be raised from INR 7 lakh to INR 10 lakh. Further, no TCS will apply on remittances for educational purposes if funded through loans from specified financial institutions.
3. Extended Timelines for Filing Updated Returns
One of the landmark changes in the new Income Tax Bill is the extension of the available window for filing updated returns from 24 to 48 Months. Currently, taxpayers are allowed to file updated returns up to 24 months from the end of an assessment year. The proposed amendment extends this period to 48 months. This extended timeline will be coupled with a revised structure for additional tax on late updated returns:
a) If filed after 24 months but before 36 months, an additional tax of 60% of the additional tax liability (tax plus interest) will be levied.
b) If filed after 36 months but before 48 months, the additional measure increases to 70% of the aggregate.
By providing a longer window, the government aims to encourage voluntary compliance and allow taxpayers more time to revise their returns without facing disproportionately high penalties.
4. Removal of Higher TDS/TCS Rates for Non‑Filers
To simplify the process at the point of deduction and alleviate the burden on deductors, FM has proposed omission of Sections 206AB and 206CCA.
Previously, higher TDS/TCS rates applied when a deductee or collectee was a non-filer of income-tax returns. The new proposals remove these higher rates, meaning that the standard TDS/TCS rates will be applied irrespective of the non-filer status.
This change reduces administrative hassles for deductors and ensures that small taxpayers are not unduly penalized for not filing returns on time.
5. Simplification of Self‑Occupied Properties Valuation
Recent amendments also target one of the longstanding complexities in personal tax, i.e. valuation of self‑occupied properties. FM has proposed relief by way of “Nil Annual Value for Self‑Occupied Houses“. Accordingly, annual value of up to two self-occupied properties is to be considered Nil. This applies if the owner occupies them for personal residence or cannot do so for any reason.
Under the current law, if a property is used by the owner for his own residence or cannot be occupied for reasons such as job changes or business commitments, its annual value is taken as nil.
The proposed amendment simplifies the provision by clarifying that the annual value of a property (or part thereof) will be taken as nil if the owner occupies it for personal residence or is otherwise unable to occupy it, without the earlier complex conditions.
This simplification is expected to make tax assessments for self‑occupied properties more straightforward and reduce disputes during assessment.
Conclusion
Budget 2025 marks a significant milestone in personal taxation reform for individuals. With revised income tax slabs designed to benefit the middle class, increased thresholds for TDS/TCS to ease compliance for small payments, extended timelines for filing updated returns, and the removal of higher TDS/TCS rates for non‑filers, the new regime is geared toward a more taxpayer‑friendly and equitable system. In addition, the simplification of self‑occupied property valuation seeks to eliminate complexities that have long burdened taxpayers.
These measures, together with other comprehensive reforms in the Finance Bill 2025, reflect the government’s commitment to “trust first, scrutinize later” and to creating an environment that promotes voluntary compliance and economic growth.