How FM Nirmala Sitharaman's Budget will help the middle class

Finance Minister Nirmala Sitharaman on Saturday presented Budget 2025 in the Parliament, her eighth consecutive Budget. She announced some major changes on the personal taxation front.

Let us look at some key amendments proposed around personal tax in the Budget 2025:

1.    Tax rates under new tax regime

The Budget proposes to revise the tax rate structure under the new tax regime while keeping the rate structure under the old tax regime unchanged.

Here is the proposed revised tax rate along with a comparison with the tax rate structure as per the existing simplified tax regime and tax savings for a resident individual (not being a senior citizen).

In the above graphic, do note that the tax rebate is available for resident individuals whose total taxable income does not exceed Rs 12 lakh. Also, standard deduction of Rs 75,000 is available against salary. Hence, for salaried individuals, the tax liability under the proposed new tax regime for incomes up to Rs 12.75 lakh, is nil.

Also read: Big boost to the middle class: No tax on incomes up to Rs 12 lakh under the new regime, says FM

2.    Extended timeline to file updated return

Currently, the timeline to file an updated return is 24 months from the end of the relevant assessment year. The Budget proposes to extend the time limit to file the updated return, to 48 months from the end of relevant Assessment Year (AY). Additional tax payable would be as follows:

TDS provisions have various thresholds of amount of payment or amount of income paid to residents, beyond which tax is required be deducted. Budget has proposed to rationalise these thresholds as below:

4.    Rationalisation of TCS threshold
Currently, TCS is required to be collected on remittance made under the Liberalised Remittance Scheme, on an amount exceeding Rs 7 lakh per annum. This limit is proposed to be increased to Rs 10 lakh. Further, it is proposed that no TCS is required to be collected on the amount remitted abroad as a loan taken from specified financial institutions for education.

5.    Annual value of the self-occupied property

Presently taxpayers can claim the annual value of self-occupied properties as NIL for 2 properties, provided the following conditions are satisfied:

- where the house property is occupied by the owner for the purposes of his residence; or

- where the owner cannot actually occupy it due to his employment, business, or profession carried on at any other place.

Considering the difficulties faced by taxpayers, it is proposed to do away with the above conditions for which the property cannot be occupied by the individual and extend the benefit in respect of property that cannot be occupied for any reason.

Overall, the Budget focuses on providing significant benefits to the middle class by reducing the tax rates and thereby increasing the take-home pay for individuals. It is clear that the Budget is aiming to further promote the adoption of the new regime. One will have to wait till next week for the New Tax Bill to be announced by the FM, to see what additional changes are proposed to be introduced.

(With inputs from Niji Arora, Director, Tarika Agarwal, Manager, and Ami Rathod, Deputy Manager with Deloitte Haskins & Sells LLP)

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