GG News Bureau
New Delhi, 2nd Feb. Sweeping Changes Aim to Simplify Taxation and Provide Relief
The Union Budget 2025 has introduced significant income tax reforms, providing major relief to middle-class taxpayers and senior citizens while streamlining compliance processes. The reforms, presented as part of the government’s vision to promote ease of living and financial inclusion, include an increase in tax exemption limits, relaxation in tax deduction at source (TDS) provisions, and an extension of compliance deadlines.
No Income Tax Up to ₹12 Lakh: A Big Win for Taxpayers
One of the biggest announcements in the Budget 2025 is the exemption of income tax on annual earnings up to ₹12 lakh. This move is expected to benefit millions of salaried individuals and business professionals, significantly increasing their disposable income. The government aims to boost economic growth by encouraging spending and investments. The new exemption limit is set to provide relief to middle-income groups and is a step towards a more progressive tax system.
TDS on Rent Limit Increased from ₹2.4 Lakh to ₹6 Lakh
In a move that benefits landlords and tenants, the threshold for tax deduction at source (TDS) on rental income has been increased from ₹2.4 lakh to ₹6 lakh. This revision will reduce the compliance burden on small property owners and provide greater liquidity, particularly in the rental housing sector. With this change, fewer individuals will be required to deduct TDS, simplifying tax procedures for small landlords and self-occupied property owners.
Higher TDS Limit for Senior Citizens on Interest Income
To provide financial security to senior citizens, the government has doubled the TDS exemption limit on interest earned from deposits, raising it from ₹50,000 to ₹1 lakh per year. This move acknowledges the dependency of many senior citizens on interest income from fixed deposits and other savings instruments. By reducing the tax burden, the government aims to ensure higher post-tax earnings for retirees, improving their financial stability.
Higher TDS Rates to Apply Only for Non-PAN Cases
In a bid to encourage tax compliance and reduce tax evasion, the government has announced that higher TDS rates will now be applicable only in cases where the taxpayer has failed to provide their Permanent Account Number (PAN). This ensures that individuals and businesses with proper documentation are not subject to excessive deductions. The move is expected to promote transparency in financial transactions and ensure a fair taxation system.
Extended Time Limit for Filing Updated Returns to Four Years
The time limit for filing updated tax returns has been extended from three years to four years, giving taxpayers an additional year to rectify or disclose any omissions in their earlier filings. This change provides greater flexibility for individuals and businesses to comply with tax regulations and reduces the likelihood of penalties due to unintentional errors. The extended timeline aligns with the government’s objective of promoting voluntary tax compliance while minimizing legal disputes.
Small Charitable Trusts to Get Extended Registration Validity
The Budget has also introduced a significant relief for small charitable trusts. The validity of their registration has been extended from five years to ten years, reducing the frequency of renewals and simplifying compliance requirements. This move will allow these trusts to focus on their charitable activities without frequent regulatory hassles, thereby strengthening the social sector and encouraging more philanthropic contributions.
Expansion of Safe Harbor Rule Scope
The scope of the safe harbor rule has been expanded to include a wider range of transactions, ensuring more certainty for businesses and reducing tax disputes. Safe harbor provisions provide predefined tax rates for certain transactions, eliminating ambiguity and reducing litigation risks. The extended scope will benefit multinational companies and domestic firms engaged in cross-border transactions, facilitating ease of doing business in India.
Conclusion
The income tax reforms proposed in Budget 2025 mark a transformative shift in India’s tax system. The exemption of income up to ₹12 lakh, enhanced TDS thresholds, and extended compliance timelines provide significant relief to taxpayers, particularly the middle class and senior citizens. Additionally, the reforms aimed at streamlining processes for charitable trusts and businesses signal a more transparent and efficient tax regime. These measures align with the government’s broader goal of simplifying taxation, promoting financial inclusion, and fostering economic growth. As the new financial year approaches, these changes are expected to bring significant benefits to millions of taxpayers across the country.
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