The Union Budget 2025 unveiled on 1 February 2025 has been responsive, and rightly so. As the Finance Minister stated, it is on the path to accelerating growth and boosting middle-class consumption through lower tax rates.

There are many key provisions which will impact the way we pay tax, save money & invest it. Here are key takeaways on Union Budget 2025 Impact on Tax & Investments.

This Union Budget 2025 bodes well for the common man, including senior citizens. The government’s fiscal strategy is credible as it moves forward on fiscal consolidation.

This budget boldly addresses the need of the hour – putting money into the hands of the middle class through meaningful tax reliefs. This will energize consumption and growth at a critical time for the Indian economy.

Budget 2025 – 6 Key Focus Areas

Agriculture 🌾, 2. Taxation 💰, (God save us) 3. Power ⚡️, 4. Urban Development 🏙️, 5. Mining ⛏️, & 6. Financial Sector/Regulatory Reforms 🏦

The objectives of changes in Direct Tax are as follows –

(i) Personal Income Tax reforms with special focus on middle class

(ii) Rationalization of TDS/TCS for easing difficulties

(iii) Encouraging voluntary compliance

(iv) Reducing compliance burden

(v) Ease of doing business

(vi) Employment and investment

Key Proposals of Union Budget 2025 – Impact on Tax & Investments

The limit for tax deduction on interest for senior citizens is being doubled from the present Rs 50,000 to Rs 1 lakh.
The annual limit of Rs 2.40 lakh for TDS on rent is being increased to Rs 6 lakh.
The threshold to collect tax collected at source (TCS) on remittances under RBI’s Liberalized Remittance Scheme (LRS) is proposed to be increased from Rs 7 lakh to Rs 10 lakh.
Removal of TCS on remittances for education purposes, where such remittance is from a loan from a specified financial institution.

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Extension of the time limit to file updated returns for any assessment year, from the current limit of two years to four years. The time limit to file updated return of income has been extended from 24 months to 48 months. But now for filing updated return and additional tax and interest payable.
To allow the benefit of two self-occupied properties without any condition. Presently one is allowed with certain conditions. Now, people can hold up to two self-occupied properties. This means, there will be no taxation on the second house, which was considered as let out property for taxation purposes.
Withdrawal from NSS & NPS Vatsalya to be tax-free from 29 Aug 2024.
Presumptive Taxation benefits to be provided to Non-residents who provide services to a resident company that is establishing or operating an electronics manufacturing facility. 25% of revenue will be considered income for tax.
Zero Income Tax till ₹12 Lakh Income under New Tax Regime. (₹12.75 lakh for salaried taxpayers with a standard deduction of ₹75,000) – The government has proposed introduction of a tax rebate for individuals having taxable income of up to Rs.12 lakh per annum in the new tax regime. If we include standard deduction of Rs.75,000, salaried individuals’ earnings up to Rs.12.75 lakh will not have to pay any tax.

The savings:

The Know Your Customer (KYC) process has long been regarded as a major obstacle due to its complexity. In this budget, the Finance Minister announced the introduction of a revamped Central KYC Registry, set to launch in 2025. The Central KYC Registry (CKYC Registry) keeps KYC records of all customers in the financial sector which can be used by institutions like mutual funds, stock brokers, insurance firms, banks and SEBI registered Investment Advisers to verify and download KYC data.
The threshold limit of TDS on dividend income on mutual funds has increased from Rs.5000 to Rs.10000. With this, there will be no TDS on investors having dividend income of up to Rs.10,000.
NPS Vatsalya, which is pension schemes for minors, will get a deduction under section 80 CCD. This means, if a parent opens an NPS Vatsalya account, he/she will get tax deduction on investment of up Rs.50,000 per annum in line with the regular NPS account.

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On a lighter note