The Union Budget 2025-26, presented on February 1, 2025, introduces various reforms and changes that will significantly impact the personal finances of Indian citizens. From amended income tax slabs to tighter regulations on cryptocurrencies, this budget aims to simplify compliance, improve disposable incomes, and promote transparency across investment classes.
As we enter the new financial year 2025-26, it is imperative for individuals to understand these updates regarding tax rules, crypto investments, retirement schemes, and property ownership. This comprehensive guide examines all the key highlights that you need to factor in when making personal finance decisions in 2025.
Income Tax Reforms: More Money in Your Pockets
The budget introduces significant income tax reforms that aim to increase disposable incomes, especially for middle-income groups, while also simplifying compliance and tax filing processes.
In a major announcement, the budget has introduced a new income tax slab of ₹12 lakh, under which no tax is payable for the financial year 2025-26. This move exempts a large section of individuals from paying any taxes, putting more money in the hands of middle-income groups. Any person earning up to ₹12 lakh annually will face zero tax liability during the fiscal.
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To help you understand the tax rates under the previous and revised regimes, here is a comparison:
| Revised New Tax Slab (₹) | Tax Rates | Previous Net Tax Slab (₹) | Tax Rates |
|---|---|---|---|
| 0 – 4 lakh | Nil | 0 – 3 lakh | Nil |
| 4 – 8 lakh | 5% | 3 – 7 lakh | 5% |
| 8 – 12 lakh | 10% | 7 – 10 lakh | 10% |
| 12 – 16 lakh | 15% | 10 – 12 lakh | 15% |
| 16 – 20 lakh | 20% | 12 – 15 lakh | 20% |
| 20 – 24 lakh | 25% | Above 15 lakh | 30% |
| Above 24 lakh | 30% | – | – |
The revised tax slabs under the new regime increase the nil-tax threshold to ₹4 lakh and introduce incremental rates from 5% to 30% for higher incomes. Compared to the previous regime, the slabs have been broadened, offering relief to lower-income groups while maintaining higher rates for affluent earners.
New Regime Comparison: FY25 & FY26
This table represents a comparison of income tax liabilities and savings under the New Tax Regime before and after the budget. For FY25, the standard deduction is ₹50,000 and for FY26, the SD is ₹75,000.
| Annual Income (in ₹) | Tax Under New Regime (FY25) | Tax Under New Regime (FY26) | How Much Tax is Saved? |
|---|---|---|---|
| 9,00,000 | 41,600 | – | 41,600 |
| 12,00,000 | 83,200 | – | 83,200 |
| 15,00,000 | 1,45,600 | 1,09,200 | 36,400 |
| 19,00,000 | 2,70,400 | 1,87,200 | 83,200 |
| 24,00,000 | 4,26,400 | 3,12,000 | 1,14,400 |
| 50,00,000 | 12,37,600 | 11,23,200 | 1,14,400 |
| 1,00,00,000 | 30,77,360 | 29,51,520 | 1,25,840 |
| 3,00,00,000 | 68,05,240 | 66,73,680 | 1,31,560 |
| 5,00,00,000 | 1,90,97,000 | 1,89,54,000 | 1,43,000 |
Crypto Regulations: Harsher Rules to Improve Compliance
While income tax saw major relief measures, the budget takes a contrarian approach towards cryptocurrencies by proposing stricter regulations around income disclosure and transaction reporting. Here are some of the key crypto-related updates:
1. Crypto Gains Classified as Undisclosed Income
The budget classifies any income from cryptocurrencies, such as profits from trading or selling of tokens, under the category of undisclosed income. Cryptocurrency earnings will now be assessed on par with funds from gambling, horse racing, and other such speculative transactions that come under increased tax scrutiny.
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2. 30% Tax Retained on Crypto Income
The budget retains the existing flat 30 percent tax on crypto asset transfers without allowing set-offs against losses incurred. This static tax treatment continues even as crypto investors face stricter compliance norms. The 1 percent TDS also continues to apply to every crypto transaction.
3. Mandatory Reporting of Crypto Transactions
One of the most significant moves is the introduction of Section 285BAA under which taxpayers have to mandatorily report details of all cryptocurrency transactions to the Income Tax department. This measure aims to bring transparency around crypto trading/investments and track tax payments.
4. 12-Month Assessment Timeline
The budget also sets a 12-month timeline for tax authorities to assess undisclosed income from crypto trading or investments from the end of the quarter in which the transaction occurred. This shorter scrutiny window requires crypto investors to be more careful.
Property Tax Updates: Double Benefit for Homeowners
In line with the government’s impetus towards affordable housing for all, Budget 2025-26 introduces dual benefits for property owners by allowing income tax breaks on two self-occupied homes instead of the earlier single-house rule.
1. Tax Relief on Two Self-Occupied Houses
Homeowners can now claim income tax deductions on interest paid on home loans for up to two self-occupied residential properties instead of just one house previously. This allows more flexibility for property owners who invest in a second real estate asset for end-use.
2. No Tax on Deemed Rental Income
Additionally, the new budget eliminates the tax incidence on deemed rental income for properties that remain vacant. Now, the annual value will be considered nil for homes that are not let out. This provides financial flexibility for property owners who are unable to rent out vacant houses.
3. Higher TDS Threshold on Rent
The budget also offers compliance relief by increasing the TDS deduction threshold on rental income from ₹2.4 lakh to ₹6 lakh per annum. The TDS will now apply only if monthly rent exceeds ₹50,000.
Retirement Planning: Improving NPS and NSS Schemes
The Budget aims to encourage long-term retirement planning by improving the tax efficiency of the National Pension Scheme and National Savings Scheme:
1. NPS Withdrawals Up to 60% Tax-Free
On retirement schemes, Budget 2025 has announced that up to 60% of withdrawals from the National Pension Scheme (NPS) will be tax-exempt for subscribers of the new NPS Vatsalya scheme. This improves the appeal for retirement planning.
2. Tax-Exempt NSS Withdrawals
The National Savings Scheme (NSS), another retirement-focused investment avenue, will also allow tax-free redemption of maturity proceeds if deductions have been previously claimed on deposits. This provides added flexibility.
3. Eased TCS Norms: Reducing Compliance Burden
Recognising the compliance burden arising from tedious Tax Collection at Source (TCS) rules, the budget has exempted certain categories of foreign remittances from the regulations:
4. Higher Limit for Foreign Remittances
It has doubled the threshold for TCS deductions under the Liberalized Remittance Scheme (LRS) to ₹10 lakh annually. This limit was earlier capped at ₹7 lakh. This provides headroom for recurring overseas remittances.
5. No TCS on Education Loans
Additionally, education loan-funded remittances have been exempted from the TCS rule if the lending is from a recognised financial institution. Students pursuing global education can benefit from this.
Key Takeaways: Adapt Financial Plans to New Rules
The Budget 2025-26 introduces significant revisions in personal tax and investment rules to benefit middle-income groups while also tightening compliance on emerging digital assets. As India’s economic growth gathers momentum in the coming decade, adapting our financial plans to capitalise on these reforms will be prudent.
So analyse your specific income levels, home ownership status, retirement goals and exposure to crypto assets while making investment decisions in the new fiscal year. Stay updated on the fine print and expert interpretations to minimise taxes and maximise savings in 2025.
Seek professional tax advice whenever necessary and rejig your monthly budgets to accommodate new tax rules and crypto regulations. The sweeping updates on retirement schemes also make this is an opportune time to secure your financial future. Overall, Union Budget 2025 aims to leave more disposable income in the hands of citizens to stimulate demand and consumption.
Reference:
SMC Global Securities Research Team
Author: All Content is verified by SMC Global Securities.
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