Union Budget 2025 - Analysis of Tax Impact

 Direct Tax

·       No change in the rate of corporate tax including surcharge & cess.

 

·       Major changes in the threshold limit of TDS  & effective from April 1, 2025.

 

Section	Nature of Payment	Old Limit	New Limit.
193	Interest on securities	NIL	10000
194A.	Interest Income – only Sr Citizen	50,000	100,000
194	Dividend Income – only for Individuals	5000	10000
194H	Commission or Brokerage	5000	10000
194I	Rent	240,000 p.a.	50,000 P.M.
194J	Professional Service	30000	50000

 

·       Major changes in TCS

 

(a)   TCS u/s 206 C (1H) @ 0.1% i.e on sale of goods more than Rs. 50 Lakhs to be collected from buyer omitted on seller of goods wef 1.4.25).

(b)  Requirement of higher TDS for non- filers of income withdrawn ( Sec 206AB & 206 CCA- wef 1.4.25)

(c)   No TCS on remittance outside India for Education purpose out of educational Loans availed ( Sec 206C( 1G)- wef 1.4.25) 

 

·       For charitable trust period of approval increased from 5 years to 10 years

 

·       Powers to impose penalty under some sections of I T Act given to AO instead of Joint Commissioner. Also the time limit to initiate penalty is end of the financial year or 6 months from the date of receipt of appellate order.   

 

·       Update Tax Return can be filed within 4 yrs of relevant AY .- Sec 139 – wef 1.4.25 

 

·       Introduction of block Transfer pricing assessment for 3 years.  

 

 

 

Indirect Tax

·       GST  Sec 17( 5) (d) amended to insert {and) in place of ( or) and now it is plant and machinery – To over-rile judgment in safari retreat case ( SC) – Tax input credit in case of commercial properties construction for leasing may not be available

 

·       10% mandatory deposit in case of demand of only penalty and not including tax before filing appeals

 

·        Definition Updates: ISD can now distribute ITC for RCM transactions; Track & Trace introduced with “Unique Identification Marking” (UIM).

 

 

Personal tax.

·       There is no change in the tax rate under old regime.

 

·       The tax rate under new regime has been provided in the below table

 

Old Rate		New Rate
Upto 3L	NIL	Upto 4L	NIL
3L-7L	5%	4L-8L	5%
7L-10L	10%	8L-12L	10%
10L-12L	15%	12L-16L	15%
12L-15L	20%	16L-20L	20%
15L+	30%	20L-24L	25%
		24L+	30%

 

·       Tax rebate u/s 87A raised to income up to 12 L from 7 L or tax deduction raised to 60000 from 25000 whichever is less. Please note that 87A rebate cannot be claimed when income exceeds Rs. 12 Lakhs. Further, rebate is not allowed for income chargeable at special rates.

 

 

 

 

 

 

 

 

 

 

 

 

 

·       The below table provides summary of tax in new regime under old rate & new rate.

 

·       Valuation of Perquisites – Limit of salary of 50000( annual) to be prescribed as per rules from time to time and and tax free limit of medical expenses including travel by employer for travel outside India for employees ( excluding Director) having gross salary income of up to Rs 2 L to be prescribed as per rules from time to time. (Sec 17 –FY 25-26, AY 26-27).  

 

·       Deduction for NPS contribution – Contribution to NPS Vatsalya Account included – 80 CCD ( FY 25-26 AY 26-27)

 

·       Withdrawal of Deposit including Interest under NSS Scheme made till 31.3.1992- Exempt – wef 29.8.24  

 

·       Redemption of  ULIP on which exemption u/s 10(10D) is not available is capital asset u/s 2(14) & subject to  tax under capital gain.

 

·       Value of two self-occupied homes now become NIL.

 

 

 

 

 

 

Others

Direct Tax :

·       No deemed dividend in case of loans between 2 group entities if one is finance company and parent entity is listed in stock exchanges outside India as may be specified. (Sec 2(22) - Wef 1.4.25). 

 

·       Losses of amalgamating entity to be carried forward by amalgamated entity up to eight yrs. which includes the period of carried forward already done by amalgamating entity. (Sec 72 A – AY 26-27, FY 25-26). 

 

·       Activities of a non-resident in India which are confined to the purchase of goods in India for the purpose

·       of export shall not constitute significant economic presence of such non-resident in India

·       Section 80-IAC benefit to start up extended till March 2030.

·       Presumptive taxation scheme proposed to non residents providing services to residents.

 

GST

·       Time of Supply for Vouchers: Taxable only upon redemption; issuance date no longer determines tax liability. 

·       ITC Reversal on Credit Notes: Recipients must reverse ITC upon credit note issuance, removing past ambiguities. 

·        ITC Statement (Section 38): Removed “auto-generated” term, allowing manual verification of ITC claims. 

·       Track & Trace Mechanism: UIM introduced for specified goods (QR Code, RFID, Barcodes) to prevent tax evasion.

·       Penalties for Track & Trace Violations: New Section 122B imposes fines and goods confiscation for non-compliance.

·       SEZ & Free Trade Warehousing Zone (FTWZ) Clarity: Goods warehoused before export not considered a supply.

·       No Refund for Retrospective Exemptions: Past tax payments cannot be refunded even if later exempted.

MSME

·       Revision in the classification criteria of MSMEs.