The Union Budget 2025 brings much awaited relief to Indian Taxpayers. On February 1st, 2025, Indian Finance Minister Nirmala Sitharaman announced the Budget. This budget emphasizes restructuring tax slabs to offer targeted relief to salaried employees and simplify tax compliance. Additionally, individuals also benefit from marginal relief provision as tax slabs have been implemented for fairness.
These reforms aim to maximize the middle class’s in hand income, thus expanding the scope of retirement investing, such as the National Pension System or NPS.
Key Highlights: Tax Reforms That Matter
Union Budget 2025 aims to bring relief to salaried professionals. Various revisions are proposed in the structure under the New Tax Regime. With a strong push to support the middleclass relief, the revamped budget maximizes disposable income. It further boosts an individual’s investment capacity.
Personal Income Tax
Increased Tax Exemption Limit for taxpayers has increased to 12 lakhs, offering much-needed respite. For those with income less than 12 lakhs annually, salary will be tax free. The revised tax slabs proposed are as follows
-
Sl.No.
Total Income (Rs. In lacs)
Rate of tax u/s
115BAC (1A)
1.
0- 4
0%
2.
4-8
5%
3.
8-12
10%
4.
12-16
15%
5.
16—20
20%
6.
20-24
25%
7.
More than 24 Lacs
30%
tax benefit for different category of taxpayers (0-24 lacs)
|
Total Income |
Tax as per existing rates[as per Finance (No.2) Act, 2024] |
Tax as per proposed rates |
Benefit of Rate/Slab |
Rebate Benefit [with reference to (3)] |
Total Benefit[computed when compared to current slab rates] |
Tax Payable under new regime |
|
(1) |
(2) |
(3) |
(4)=(3)-(2) |
(5) |
(6)=(4)+(5) |
(7) |
|
8 lac |
30,000 |
20,000 |
10,000 |
20,000 |
30,000 |
0 |
|
9 lac |
40,000 |
30,000 |
10,000 |
30,000 |
40,000 |
0 |
|
10 lac |
50,000 |
40,000 |
10,000 |
40,000 |
50,000 |
0 |
|
11 lac |
65,000 |
50,000 |
15,000 |
50,000 |
65,000 |
0 |
|
12 lac |
80,000 |
60,000 |
20,000 |
60,000 |
80,000 |
0 |
|
13 lac |
1,00,000 |
75,000 |
25,000 |
0 |
25,000 |
75,000 |
|
14 lac |
1,20,000 |
90,000 |
30,000 |
0 |
30,000 |
90,000 |
|
15 lac |
1,40,000 |
1,05,000 |
35,000 |
0 |
35,000 |
1,05,000 |
|
16 lac |
1,70,000 |
1,20,000 |
50,000 |
0 |
50,000 |
1,20,000 |
|
17 lac |
2,00,000 |
1,40,000 |
60,000 |
0 |
60,000 |
1,40,000 |
|
18 lac |
2,30,000 |
1,60,000 |
70,000 |
0 |
70,000 |
1,60,000 |
|
19 lac |
2,60,000 |
1,80,000 |
80,000 |
0 |
80,000 |
1,80,000 |
|
20 lac |
2,90,000 |
2,00,000 |
90,000 |
0 |
90,000 |
2,00,000 |
|
21 lac |
3,20,000 |
2,25,000 |
95,000 |
0 |
95,000 |
2,25,000 |
|
22 lac |
3,50,000 |
2,50,000 |
1,00,000 |
0 |
1,00,000 |
2,50,000 |
|
23 lac |
3,80,000 |
2,75,000 |
1,05,000 |
0 |
1,05,000 |
2,75,000 |
|
24 lac |
4,10,000 |
3,00,000 |
1,10,000 |
0 |
1,10,000 |
3,00,000 |
|
25 lac |
4,40,000 |
3,30,000 |
1,10,000 |
0 |
1,10,000 |
3,30,000 |
|
50 lac |
11,90,000 |
10,80,000 |
1,10,000 |
0 |
1,10,000 |
10,80,000 |
* For income above 12 lac, in the case of resident individuals, marginal relief shall be allowable .
Increase in Standard Deduction
The standard deduction within the new tax regime has increased from the previous ₹50,000 to ₹75,000. This increase further adds relief to regular salaried employees as it helps reduce directly taxable income. Therefore, a salaried tax payer will not be required to pay any tax where the income before standard deduction is less than or equal to Rs 12,75,000/-.
Abolition Angel Tax
In a growing economy like India, boosting the startup economy is key. Abolition of the ‘Angel Tax’ is a promising step towards supporting the startup culture. The government announced the Scrapping of the Angel Tax in Budget 2024; however, it is effective from the financial year 2025-2026. This is a major win for India’s booming startup ecosystem. It paves the way for fundraising and innovation.
Capital Gain Taxes
Short Term Capital Gains (STCG): It has been increased from 15% to 20%. This short term capital gain tax is from listed equity shares and equity oriented funds.
Long Term Capital gain tax (LTGC): The indexation benefit no longer applies. The LTGC has been standardized to 12.5% across all assets.
Goods and Service Tax Simplified
A simplification in the structuring of the GST is proposed. It proposes to include clauses where the government can lay out conditions and restrictions for filing returns on the GSTN portal.
Influence of the new tax budget on NPS
-
Increased Tax Benefits: The additional deduction of Rs. 50,000 over and above the Rs. 1.5 lakh limit under section 80C remains unchanged. This can become a lucrative option for individuals investing in NPS to build retirement funds.
-
Deductions : Section 80CCD(2) introduced in Union Budget 2024. Under this, employees can deduct 14% of their basic salary while investing in NPS, under the new tax regime. Under the old regime, the deduction remains unchanged i.e 10% of salary.
-
Relief for Senior Citizens: Nirmala Sitharaman, in her budget speech, mentioned, “A number of senior and very senior citizens have very old National Savings Scheme accounts. As interest is no longer payable on such accounts, I propose to exempt withdrawals made from NSS by individuals on or after the 29th of August, 2024.”
Conclusion:
The Union Budget 2025 has proposed promising restructuring that is taxpayer-friendly. Thus, allowing individuals to look for lucrative investment opportunities. With higher disposable income and enhanced tax incentives, NPS emerges as a smarter choice for securing a stable retirement. Salaried employees will have higher disposable income with an increased standard deduction taxable income limit. This can incentivize individuals to plan and save towards a financially secure retired life.
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