By CA Ayush Sawhney
B.Com, CA, DISA, FAFD,CCAB
In a strategic move to invigorate the economy and provide substantial relief to the middle class, Finance Minister Nirmala Sitharaman unveiled significant tax reforms in the Union Budget 2025-26. These reforms are designed to enhance disposable income, stimulate consumer spending, and simplify the tax structure.
Revised Income Tax Slabs:
The new tax regime introduces adjusted income tax slabs, offering considerable relief to taxpayers:
- Income up to ₹4 lakh: No tax
- Income from ₹4,00,001 to ₹8 lakh: 5%
- Income from ₹8,00,001 to ₹12 lakh: 10%
- Income from ₹12,00,001 to ₹16 lakh: 15%
- Income from ₹16,00,001 to ₹20 lakh: 20%
- Income from ₹20,00,001 to ₹24 lakh: 25%
- Income above ₹24 lakh: 30%
Notably, individuals earning up to ₹12 lakh annually will now be exempt from paying income tax, with the exemption limit extending to ₹12.75 lakh for salaried individuals due to a standard deduction of ₹75,000.
Impact on Taxpayers:
These adjustments are anticipated to benefit approximately 25-30 million taxpayers, resulting in annual savings of about ₹1 lakh per individual. The increased disposable income is expected to boost discretionary spending on consumer goods, automobiles, and real estate, thereby stimulating economic growth.
Rationalization of TDS and TCS:
To simplify tax compliance, the government has proposed rationalizing Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). Threshold limits across various TDS sections have been raised, aiming to ease the compliance burden for taxpayers, especially those in the middle-income bracket.
Corporate Tax and Business Incentives:
While the budget primarily focuses on personal income tax relief, it also addresses the corporate sector. The government plans to review the regulatory environment to reduce bureaucratic hurdles and foster investment. Additionally, measures to promote high-yield crops in agriculture, boost manufacturing and exports, and increase foreign direct investment in insurance have been proposed.
Conclusion:
The Union Budget 2025-26 reflects the government’s commitment to revitalizing the economy through substantial tax reforms and strategic incentives. By alleviating the tax burden on individuals and businesses, these measures aim to foster a more robust and dynamic economic environment.
