Union Budget 2025-26: Here is What Changed for Your Personal Finance and Income Tax

Here is what changed for the common man in terms of personal finance and taxation after the Union Budget 2025-26:

1) Income Tax revamp

Ms Sitharaman announced that there will be no income tax payable up to annual salary income of Rs 12 lakh (i.e. average income of Rs 1 lakh per month other than special rate income such as capital gains) under the new regime. Salaried individuals with income up to Rs 12 lakh can claim tax rebate u/s 87a in such a manner that there will be no tax payable by them. This is a huge leap compared to the earlier annual income limit of Rs 7 lakh. This along with the standard deduction of Rs 75,000 means that salaried individuals will have to pay no tax up to Rs 12.75 lakh.

The government also raised the basic exemption limit to Rs 4 lakh from Rs 3 lakh earlier. Moreover, it once again revised the income tax slab and rates as follows:

The changes in tax structure can result in potential higher savings in terms of tax liability for individuals opting for the new tax regime compared to individuals with similar income under the old tax regime. Notably, the government has not announced any revision of the tax structure for the old tax regime.

2) Revision of TDS and TCS threshold

In a relief for individuals earning rental income, the government has proposed that TDS exemption limit for rental income as per section 194-I increased to Rs 6 lakh from Rs 2.4 lakh. Furthermore, for senior citizens earning interest income, the limit for tax deduction has been doubled to Rs 1 lakh. For others, the TDS threshold for interest income has been increased to Rs 50,000 from Rs 40,000 earlier. TDS threshold on insurance commission, income by way of commission, prize etc. on lottery tickets, and commission or brokerage has been revised to Rs 20,000 from Rs 15,000. Meanwhile, for income in respect of units of mutual funds, TDS will now be deducted on dividend income exceeding Rs 10,000 from the earlier threshold of Rs 5,000.

In the case foreign remittances (sending money abroad), TCS will now be deducted only if the remittances exceed Rs 10 lakh in a financial year, up from the previous limit of Rs 7 lakh. No TCS will apply on remittance under LRS for purpose of education, financed by loan from financial institution.

3) Contributions to NPS Vatsalya

Individuals contributing to the NPS Vatsalya account will now be able to claim deductions under Section 80CCD of the Income Tax Act, 1961, similar to normal NPS account.

4) Self-occupied properties

The government has announced that with effect from April 01, 2025, taxpayers will be able to claim the annual value of up to two self-occupied properties as nil without any conditions. This comes as a relief as earlier homebuyers could benefit from tax exemption on only one self-occupied property, while additional properties were taxed based on deemed rental income, even if they were not let out.

5) Updated income tax returns

The government has proposed to extend the time limit to file the updated income tax return from the existing 24 months to 48 months from the end of the relevant assessment year. The additional tax payable will be 60% of the aggregate of tax and interest payable on additional income for filing updated return during the period of 24 months to 36 months from the end of the relevant assessment year. Additional tax payable will be 70% of the aggregate of tax and interest payable for filing updated return during the period of 36 months to 48 months from the end of the relevant assessment year subject to certain conditions.

6) Cheaper lifesaving medicines

To provide relief to individuals suffering from cancer, rare diseases and other severe chronic diseases, the government has proposed to add 36 lifesaving drugs and medicines to the list of medicines fully exempted from Basic Customs Duty (BCD). It will also add 6 lifesaving medicines to the list attracting concessional customs duty of 5%. Full exemption and concessional duty will also respectively apply on the bulk drugs for manufacturing of the above.

7) Higher Kisan Credit Limit

The government has proposed that loan limit under Kisan Credit Cards that facilitate short term loans for farmers, fisherman, and dairy farmers at subsidised interest rate, will be enhanced to Rs 5 lakh from Rs 3 lakh.

8) New Income Tax Bill

The government will introduce a new Income Tax Bill that will be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation.

9) KYC simplification

The government will roll out a revamped CKYC registry to simplify the KYC process and will also implement a streamlined system for periodic updating of information.

10) Withdrawals on National Savings Scheme

For senior and very senior citizens having very old National Savings Scheme accounts, withdrawals will be exempted from tax as interest on such accounts is no longer payable.

With the Indian economy, corporate earnings, and consumption witnessing a slowdown in recent quarters, the government has placed its trust in salaried individuals to spur the growth by providing tax relief. The government has also been focusing on ease of doing business and boosting local manufacturing which too is expected to bode well for the economy, investor confidence, and employment generation.

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DIVYA GROVER is the co-editor for FundSelect, the flagship research service of PersonalFN. She is also the co-editor of DebtSelect. Divya is an avid reader which helps her in analysing industry trends and producing insightful articles for PersonalFN’s popular newsletter – Daily Wealth letter, read by over 1.5 lakh subscribers.
Divya joined PersonalFN in 2019 and has since then used stringent quantitative and qualitative parameters to analyse funds to provide honest and unbiased research to investors. She endeavours to enable investors to make an informed investment decision and thereby safeguard their wealth.

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This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.