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Union Budget 2025 Key features on Income Tax \Finance Bill 2025

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Union Budget 2025 Key features\Finance Bill 2025

Direct Tax proposals

Introduction of a scheme for determining arm’s length price of international transaction for a block period of three years.

Expansion of scope of safe harbour rules to reduce litigation and provide certainty in international taxation.

Rationalization of TDS/TCS for easing difficulties

Tax deduction limit for senior citizens doubled from ₹ 50,000 to ₹ 1 lakh.
The annual limit of ₹2.40 lakh for TDS on rent increased to ₹ 6 lakh.

Personal Income Tax reforms with special focus on the middle Class

Class	Tax Rate
0-4 lakh	Nil
4-8 lakh	5%
8-12 lakh	10%
12-16 lakh	15%
16-20 lakh	20%
20-24 lakh	25%
24 to above	30%

Amendment of section 87A.

In section 87A of the Income-tax Act, with effect from the 1st April, 2026,––
(a) in first proviso,––

(i) in clause (a),––
(I) for the words “seven hundred thousand rupees”, the words “twelve hundred thousand
rupees” shall be substituted;
(II) for the words “twenty-five thousand rupees”,the words “sixty thousand rupees” shall be
substituted;
(ii) in clause (b), for the words “seven hundred thousand rupees” at both the places where they occur, the words “twelve hundred thousand rupees” shall be substituted;
(b) after the proviso, the following proviso shall be inserted, namely:––
“Provided further that the deduction under the first proviso, shall not exceed the amount of income-tax
payable as per the rates provided in sub-section (1A) of section 115BAC.”.

Encouraging voluntary compliance

Extension of time-limit to file updated returns, from the current limit of two years, to four years.

Reducing compliance burden

Reduced compliance for small charitable trusts/institutions by increasing their period of registration from 5 years to 10 years.
Tax payers to be allowed to claim the annual value of 02 self occupied properties (previously 01) without any conditions (previously conditions attached).

Employment and investment

Tax certainty for electronics manufacturing Schemes
Tonnage Tax Scheme for Inland Vessels
Extension for incorporation by 5 years of Start-Ups
Specific benefits to ship-leasing units, insurance offices and treasury centres of global companies which are set up in IFSC
Certainty of taxation to Category I and category II AIFs, undertaking investments in infrastructure and other such sectors, on the gains from securities.