Record of key direct tax reforms and reduction, CFO Information, ETCFO
Finance Minister Nirmala Sitharaman, within the Union Price range for FY 2025-26, launched a bunch of direct tax reforms aimed toward decreasing the compliance burden, offering reduction to middle-class taxpayers, and selling financial progress. A serious spotlight of the announcement was the introduction of recent tax buildings, enhanced TDS exemptions, and initiatives to help electronics manufacturing, startups, and infrastructure investments.
Tax Reduction for Center-Class: No Private Revenue Tax as much as Rs 12 Lakh
In a big transfer to ease the tax burden, the Finance Minister proposed that no private revenue tax can be payable for revenue as much as Rs 12 lakh underneath the brand new tax regime. For salaried people, this exemption restrict will enhance to Rs 12.75 lakh as a consequence of a normal deduction of Rs 75,000. This transformation is predicted to profit hundreds of thousands of middle-class taxpayers by leaving extra disposable revenue of their arms for financial savings, consumption, and funding.
“This can considerably scale back the taxes of the center class, boosting family consumption, financial savings, and funding,” Sitharaman acknowledged throughout her funds speech.
The brand new tax construction can be designed to be easier, clearer, and extra taxpayer-friendly, aiming for decreased litigation and higher tax certainty. Income of roughly Rs 1 lakh crore is predicted to be forgone as a consequence of these modifications.
Revised Tax Fee Construction: Simplified and Progressive
Underneath the revised tax regime, the next tax charges will apply:
Revenue as much as Rs 4 lakh: Nil
Rs 4-8 lakh: 5%
Rs 8-12 lakh: 10%
Rs 12-16 lakh: 15%
Rs 16-20 lakh: 20%
Rs 20-24 lakh: 25%
Above Rs 24 lakh: 30%
This tiered strategy goals to ease the burden on middle-income earners whereas sustaining progressivity for higher-income brackets.
TDS and TCS Rationalization: Lowering Compliance Burden
To additional simplify tax compliance, Sitharaman proposed a number of rationalizations to the Tax Deducted at Supply (TDS) and Tax Collected at Supply (TCS) programs. Key highlights embrace:
The restrict for tax deduction on curiosity for senior residents has been doubled from Rs 50,000 to Rs 1 lakh.
The TDS threshold for rental revenue has elevated from Rs 2.4 lakh to Rs 6 lakh.
The brink for gathering tax at supply (TCS) on remittances underneath the Liberalized Remittance Scheme (LRS) has been raised from Rs 7 lakh to Rs 10 lakh.
These strikes are anticipated to cut back pointless compliance hassles and supply higher reduction to taxpayers, notably seniors and people within the rental revenue bracket.
Tax Certainty for Electronics Manufacturing and Startups
To encourage funding in electronics manufacturing, the Price range proposes a presumptive taxation regime for non-residents concerned within the sector, providing tax certainty for these offering companies to firms organising electronics manufacturing services.
Moreover, the federal government has launched a protected harbour for tax certainty for non-residents who retailer elements for provide to electronics manufacturing models.
The Price range additionally prolonged the interval for startup incorporation eligibility by 5 years, now permitting startups included earlier than March 31, 2030, to avail themselves of sure tax advantages.
Extension of Sovereign and Pension Funds Funding Date
A key measure to spice up infrastructure funding, the federal government has prolonged the deadline for making investments in Sovereign Wealth Funds and Pension Funds by 5 years to March 31, 2030. This transfer goals to encourage higher investments in infrastructure, additional propelling India’s progress trajectory.
Decriminalization and Simplified Tax Regimes for Charitable Trusts
Sitharaman additionally proposed the decriminalization of sure tax violations, together with these associated to the delay in cost of TCS, guaranteeing the system stays user-friendly. Moreover, the federal government prolonged the registration interval for small charitable trusts from 5 to 10 years, decreasing their compliance burden.
