new-budget-from-apr-1-brings-major-tax-relief

The new budget will come into effect on 1st April 2025, implementing the announcements made by the government on 1st February. However, the benefits of certain schemes will depend on the type of programme and the process of implementation.

 

Tax exemptions and subsidies typically come into effect from 1st April as they are linked to the financial year. However, infrastructure projects, social welfare schemes, and development initiatives may take longer, as they require a detailed execution process.

Six Key Changes Coming into Effect from 1st April

1. Changes in Tax Slabs: New Bracket for Incomes Between ₹20–24 Lakh

What has changed? Under the new tax regime, income up to ₹12 lakh will now be tax-free. Salaried individuals will also benefit from a ₹75,000 standard deduction, effectively increasing the tax-free threshold to ₹12.75 lakh. Additionally, a new 25% tax slab has been introduced for incomes between ₹20–24 lakh.

Impact: Previously, the highest tax rate of 30% was applicable to incomes above ₹15 lakh. Now, this threshold has been raised to ₹24 lakh, providing tax relief to middle- and upper-middle-income groups.

2. Increase in TDS Exemption Limits: No Tax on Rental Income up to ₹6 Lakh

What has changed? The tax deduction at source (TDS) limits have been revised for certain payments:

• Rental income: The TDS exemption threshold has been doubled from ₹2.4 lakh to ₹6 lakh.

• Senior citizens: The TDS exemption on interest income from bank fixed deposits has been raised from ₹50,000 to ₹1 lakh.

• Professional services: The TDS threshold for professional service payments has increased from ₹30,000 to ₹50,000.

Impact: These changes will reduce the TDS burden on individuals with lower incomes and improve cash flow.

3. TCS Limit Raised: No Tax on Overseas Education Payments up to ₹10 Lakh

What has changed? The tax collected at source (TCS) limit for sending money abroad for education has been increased from ₹7 lakh to ₹10 lakh. If the amount is sourced through an educational loan from a financial institution, no TCS will be applied.

Impact: This will benefit students and their families by reducing tax deductions on overseas remittances. Previously, TCS ranged from 0.5% to 5% on amounts exceeding ₹7 lakh, making the process cumbersome. Now, full transfers up to ₹10 lakh will be tax-free.

4. More Time to File Updated Tax Returns: Extended to 48 Months

What has changed? Taxpayers will now have up to 48 months (instead of 24 months) to file updated returns, with some conditions:

• Returns filed between 24–36 months will incur an additional 60% tax.

• Returns filed between 36–48 months will incur an additional 70% tax.

Impact: This extension allows taxpayers more time to rectify mistakes, encouraging voluntary compliance.

5. Capital Gains Tax on ULIPs: Premiums Above ₹2.5 Lakh Considered Capital Assets

What has changed? If the annual premium for a Unit Linked Insurance Plan (ULIP) exceeds ₹2.5 lakh, it will now be considered a capital asset. Any gains upon redemption will be subject to capital gains tax:

• Held for more than 12 months: 12.5% long-term capital gains (LTCG) tax will apply.

• Held for less than 12 months: 20% short-term capital gains (STCG) tax will apply.

Impact: High-income taxpayers will no longer be able to use ULIPs as a tax-free investment. The government argues that since a significant portion of ULIP premiums is invested in the stock market, they should not receive the same tax benefits as traditional insurance policies.

6. Custom Duty Revisions: 150–200 Products Affected

What has changed? The government has revised customs duties on several products. Some have seen reductions, while others have been increased. These changes generally take effect from 1st April unless specified by the Central Board of Indirect Taxes and Customs (CBIC).

Impact: The prices of certain goods will be affected.

Items expected to become cheaper:

• Imported cars costing over $40,000 or with an engine capacity exceeding 3,000cc.

• Motorcycles imported as completely built-up (CBU) units with engine capacity under 1,600cc.

• Life-saving drugs for critical treatments, as customs duties on 36 such medicines have been removed.

• Electric vehicles (EVs), as duties on 35 capital goods for battery manufacturing have been waived.

• Mobile phone battery production, with 28 capital goods exempted from customs duty.

Items expected to become costlier:

• Smart meters, solar cells, imported footwear, imported candles, imported boats and ships.

• PVC flex films, banners, knitted fabrics, LCD/LED televisions.

When Will the Benefits of Budget Schemes Be Available?

• Social welfare schemes (such as cash assistance for farmers, women’s schemes, or employment initiatives) may begin rolling out between June and July.

• Infrastructure projects (such as roads, railways, schools, and hospitals) will take longer due to the planning, tendering, and construction process.

How the Budget Process Works in Seven Stages

1. Budget Preparation: The Finance Ministry drafts the budget after consultations with various ministries, departments, and experts.

2. Budget Presentation: The Finance Minister presents the annual budget in the Lok Sabha on 1st February each year. The speech details the government's revenue and expenditure plans.

3. Parliamentary Debate: The budget is discussed in both Lok Sabha and Rajya Sabha, where MPs express their views on its provisions.

4. Appropriation Bill: After discussions, this bill is introduced in both houses to authorise the government to withdraw funds from the Consolidated Fund of India.

5. Finance Bill: This bill implements the tax-related changes proposed in the budget.

6. Presidential Approval: Once both the Appropriation Bill and the Finance Bill are passed by Parliament, they are sent to the President for approval.

7. Implementation: After receiving presidential assent, the budget becomes law and takes effect from 1st April for the new financial year.