Union finance minister Nirmala Sitharaman on Saturday announced significant income tax cuts for the middle class and unveiled reforms for a ‘Viksit Bharat’, balancing fiscal prudence with growth.
Individuals earning up to Rs 12 lakh annually will pay no tax, with an additional Rs 75,000 standard deduction for the salaried class. The revised tax slabs will help people earning up to Rs 25 lakh save up to Rs 1.1 lakh in taxes, benefiting 6.3 crore taxpayers.
Here’s 10 things individual taxpayers should know
1. To provide relief to the middle class, FM has rationalised slab rates under the new tax regime, which continues to be the default regime. For example, under the new tax regime for FY 2025-26, individuals earning a taxable income of 25 lakh can save as much as 1,10,000 in taxes.
2. Aligning with the rationalisation of tax slabs, the tax rebate has been enhanced from 25,000 to 60,000 for those availing the new tax regime (not applicable for Non-Resident Indians).
3. Earlier, taxpayers could claim two houses as self-occupied if they lived in them or couldn’t stay in one because their place of work was elsewhere. The FM has now made it even simpler — owners can continue to claim two houses as self-occupied, whether they live in them or not, without needing to meet any specific conditions.
4. The threshold for Tax Collected at Source (TCS) on overseas remittances under the Liberalised Remittance Scheme (LRS) has been increased from 7 lakh to 10 lakh. Overseas travel, for instance, gets a boost.
5. Additionally, TCS will not apply to remittances made for educational expenses, where such remittance is out of a loan taken from a specified financial institution. Earlier, the TCS on this was applicable at 0.5% on remittance over 7 lakh.
6. Taxpayers can file an updated tax return to rectify any omissions or wrong statements made in their original tax return. The time limit to file the updated return has been increased from existing 24 months to 48 months, but with stiff additional tax and interest aggregating to 70%.
7. Tax deduction (under the old tax regime) for own contribution to National Pension System (NPS) of 50,000, has been extended to contributions made in the name of minors under NPS Vatsalya scheme.
8. The limit for tax deduction (TDS) on interest income for senior citizens has been increased from the present limit of 50,000 to 1 lakh. For other taxpayers, the limit has been enhanced to 50,000 from 40,000 for interest from deposits from banks, co-operative societies, post office and to 10,000 (from 5,000) in other cases.
9. Rent paid by non-individuals (such as a corporate tenant) entails a TDS obligation. The threshold limit of 2.4 lakh per annum for such TDS has been increased to 50,000 per month — or even part of a month.
10. There is an increase in the threshold limit of TDS on dividend income and income from mutual fund units from the existing threshold of 5,000 to 10,000.
