Union Budget 2025 | Resetting India’s direct tax policy

The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman, is a transformative blueprint, seeking to balance short-term economic relief with long-term structural reforms aimed at boosting consumption, enhancing the ease of doing business and drive investments.  

Measures to boost consumption

A key highlight of the Budget is the unprecedented populist tax relief provided to middle-income taxpayers. While tax cuts were widely anticipated, the scale of the proposals—offering a substantial Rs1 lakh crore additional disposable income—will have a direct and positive impact on household consumption, boosting demand and stimulating savings and investment. The exemption from tax for individual taxpayers is proposed to be raised from Rs 7 lakh to Rs 12 lakh.

Reducing withholding taxes on senior citizens and allowing taxpayers to claim the annual value of 2 self-occupied properties without conditions are other measures reflecting the desire to boost consumption.  

Ease of doing business

In line with its commitment to reducing red tape, the Budget adopts a “Trust first, scrutinise later” approach, emphasising the simplification of regulatory and tax frameworks. The introduction of a new direct tax bill that is expected to be 50 per cent lighter in content and verbiage. A welcome move! This reform is expected to enhance tax certainty and mitigate the potential for litigation. Building on this theme are the extension of time limit for filing updated tax return from two to four years, as well as the rationalisation of TDS provisions by reducing the number of rates and increasing thresholds. It is also proposed to abolish the requirement of higher TDS in cases of non-filer of tax returns and restrict the same only to non-PAN cases.  

Augmenting investments 

Recognising the critical role of start-ups in driving economic growth, the Budget proposes to extend the tax holiday for eligible start-ups by five years, with the new deadline set for those incorporated on or before April 1, 2030. 

It is also clarified that investments made by Alternative Investment Funds (AIFs) in India will be treated as capital assets (rather than business income), which is a welcome move for investors, given the success of previous fund of funds for start-ups.

The Budget also includes several measures aimed at boosting investment and employment in International Financial Services Centers (IFSCs). The sunset dates for tax concessions related to IFSCs have been extended until 31 March 2030. This includes exemptions on capital gains and dividends for ship leasing units in IFSCs, aligning them with similar benefits already extended to aircraft leasing. 

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Union Budget 2025 | Nirmala Sitharaman, as Finance Minister, presented her record 8th Union Budget this time. While inflation has burnt a hole in the pockets of 'aam janata', the Modi govt gave income tax relief for those making up to Rs 12 lakh per year in salaried income. Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.