Finance Bill 2025 Passed in Lok Sabha

On Tuesday, the Lok Sabha passed the Finance Bill 2025 and 35 government amendments. Finance Minister Nirmala Sitharaman emphasised that the legislation aligns with the people’s aspirations and the government’s vision of making India a developed country by 2047. 

India’s Budget 2025-26: Key Financial Highlights

The Union Budget for 2025-26 outlines a total expenditure of ₹50.65 lakh crore, reflecting a 7.4% increase compared to the previous fiscal year. Key allocations include:

• Capital Expenditure: ₹11.22 lakh crore (effective ₹15.48 lakh crore)
• Gross Tax Revenue: ₹42.70 lakh crore
• Gross Borrowing: ₹14.01 lakh crore
• Resource Transfer to States: ₹25.01 lakh crore
• Central Sector Schemes: ₹16.29 lakh crore 
• Centrally Sponsored Schemes: ₹5.41 lakh crore

How Budget 2025-26 Reshapes India’s Fiscal and Tax Policies

The fiscal deficit for FY26 is projected at 4.4%, compared to 4.8% in the current fiscal year. The estimated GDP for FY 2025-26 is ₹3,56,97,923 crore, reflecting a 10.1% increase over the previous year’s estimates. The Finance Bill, 2025, has introduced a key amendment that confines `block’ assessments in tax search and seizure cases only to undisclosed income.

The new provision prevents reassessment of previously declared earnings, offering greater certainty to taxpayers and reducing the risk of extended tax disputes. 

Key Changes and New Rules

1. New Income Tax Slabs under the New Regime (FY 2025–26)

The new income tax regime is going to be the default option from April 1, 2025. Taxpayers who wish to continue using the old regime must opt in explicitly each financial year.

Revised Slab Rates under the New Regime

2. Enhanced Section 87A Rebate 

The Section 87A rebate relieves lower-income individuals by reducing or eliminating tax liability. No tax payable if total revenue is up to Rs. 7.5 lakh under the new regime after applying the standard deduction

3. Major TDS Revision

Several threshold limits for TDS have been revised to reduce the burden on small taxpayers and improve liquidity. 

a. Interest Income (Section 194A): Senior citizens will not face TDS unless the annual interest income exceeds Rs. 1 lakh, while for other individuals, it is raised from Rs. 40,000 to Rs. 50,000.

b. Dividend Income: TDS applies if the total dividend income for equity and mutual fund dividends exceeds Rs. 10,000 in a financial year. 

c. Commission Income (Section 194D/194H): TDS will be deducted if the total commission or brokerage income exceeds Rs. 20,000 in a year. 

d. Online Gaming Winnings (Section 194BA): TDS will be deducted if total winnings exceed Rs. 10,000 per financial year. 

e. Property Transactions: TDS at 1% will now apply only for transactions exceeding Rs. 75 lakh for the sale or purchase of immovable property.

Also Read: RBI Shocks Markets with Surprise Rate Cut to 6.25%!

4. Revised TCS

The government has also revised certain TCS thresholds and rates, particularly affecting high-value transactions and international spending.

a. Foreign Remittances under Liberalised Remittance Scheme (LRS): The TCS rate has been reduced from 20% to 15% for non-educational and non-medical foreign remittances, applicable if the total remittance exceeds Rs. 7 lakh in a financial year. Education and medical treatment remittances attract 5% TCS beyond Rs. 7 lakh.

b. International Tour Packages: TCS for tour operators selling overseas travel packages has been reduced from 20% to 15%. 

c. Sale of Goods: TCS at 0.1% continues to apply on the sale of goods (excluding exports) if the seller’s turnover exceeded Rs. 10 crore in the previous year or the value of goods sold to a single buyer exceeds Rs 50 lakh. 

5. Extended Deadline for Filing Updated Income Tax Returns 

Taxpayers now have more time to rectify omissions or file missed returns. It was 12 months earlier, but under the new rules, it is 48 months. 

6. Start-Up Tax Exemptions 

Start-ups have until March 2030 to register and avail tax exemptions under Section 80-IAC.

7. Remuneration Deduction for Partners

The limits for partner remuneration deductions have been clarified based on book profit. Earlier, they were up to 6 LPA; now, they are up to 3 LPA or 90% of book profit, whichever is higher. 

8. Incentives for International Financial Services Centres (IFSC)

The deadline for starting operations to claim tax benefits has been extended to March 31, 2030. Life insurance policies issued by IFSC units to non-residents will now enjoy full tax exemption regardless of premium size.

9. Taxation of ULIPs 

Gains from ULIPs will be taxed as capital gains if the premium exceeds Rs. 2.5 lakh annually or more than 10% of the sum assured, losing exemption under Section 10(10D).

10. Deemed Rent on House Properties – Relaxed Rules 

Under the new provision, taxpayers can now claim up to two house properties as self-occupied. 

Budget Impact on Businesses, Taxpayers, States & Industries

• For Taxpayers, the government has proposed measures to rationalise taxes, enhance the ease of doing business, and provide tax relief to individuals and corporations.

• The increased resource transfer for states will provide more funds for state-level development projects.

• For Digital Businesses, the government’s removal of the 6% digital tax will reduce compliance burdens and encourage investments in India’s digital economy.

• Focusing on tariff rationalisation and removing duty inversion for Industries will reduce input costs and improve manufacturing competitiveness.

New Tax Bill Enhances Digital Asset Regulations

The government has proposed strengthening the legal provisions to track digital assets under the new Income Tax Bill 2025, as it did not previously provide adequate legal backing for investigating digital assets. The new tax bill allows officials to access communication platforms, enterprise software, and storage servers businesses use to conceal financial transactions.