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The Union Finance Minister, Nirmala Sitharaman has proposed the budget for FY 2025-26. Here are some key announcements that can impact your business.
Middle class and upper middle-class people to have more money at their discretion
The government has proposed introduction of a tax rebate for individuals having taxable income of up to Rs.12 lakh per annum in the new tax regime. If we include standard deduction of Rs.75,000, salaried individuals’ earnings up to Rs.12.75 lakh will not have to pay any tax.
Retired clients having SWP income through fixed income funds can opt for a new tax regime to get tax exemption up to the income of Rs.12 lakh.
Further, the government has reduced the tax structure in the new tax regime.
|
Income |
Tax rates |
|
Up to Rs.4 lakh |
Nil |
|
Rs.4-Rs.8 lakh |
5% |
|
Rs.8-Rs.12 lakh |
10% |
|
Rs.12-Rs.16 lakh |
15% |
|
Rs.16-Rs.20 lakh |
20% |
|
Rs.20-Rs.24 lakh |
25% |
|
Above 24 lakh |
30% |
The new rates will reduce tax burden for upper middle-income individuals, believes the FM. She said, “A tax payer in the new regime with an income of Rs. 12 lakh will get a benefit of Rs. 80,000 in tax (which is 100% of tax payable as per existing rates). A person having income of Rs.18 lakh will get a benefit of Rs. 70,000 in tax (30% of tax payable as per existing rates). A person with an income of Rs.25 lakh gets a benefit of Rs.1,10,000 (25% of his tax payable as per existing rates).”
Changes in mutual funds, insurance and AIFs
The threshold limit of TDS on dividend income on mutual funds has increased from Rs.5000 to Rs.10000. With this, there will be no TDS on investors having dividend income of up to Rs.10,000.
In insurance, the government has increased the FDI to 100%. This will boost investment in the industry.
Further, the government has also enhanced the threshold limit on commission income of insurance agents. The insurance agents will be exempted from TDS till the commission of Rs.20,000.
In AIF space, the government will provide certainty of taxation on the gains from securities done by AIF Cat I and Cat II undertaking investments in infrastructure and other related sectors.
NPS Vatsalya, which is pension schemes for minors, will get a deduction under section 80 CCD. This means, if a parent opens an NPS Vatsalya account, he/she will get tax deduction on investment of up Rs.50,000 per annum in line with the regular NPS account.
Further, the government has made withdrawals from the National Savings Scheme (NSS) tax free. With this, people can enjoy tax free income from this scheme.
Good news for wealthy individuals
Now, people can hold up to two self-occupied properties. This means, there will be no taxation on the second house, which was considered as let out property for taxation purposes.
In simple words, people having a second house have to pay tax on rental income on market rate irrespective of the fact whether the property is actually let out or not.
Simplified KYC
The government has proposed implementation of a simplified KYC regime. In fact, the government has said that it will roll out the central KYC registry by 2025.
Other key highlights
- The government has revised its fiscal deficit target to 4.8% of the GDP in 2024-25
- For FY 2025-26, the government targets fiscal deficit of 4.4% of the GDP
- The government has increased its capex to Rs.10.18 lakh crore
- The government has proposed to reduce basic custom duties across products and services
- Government to offer special benefits to insurance companies planning to open office in IFSCA
