India – 2025-26 Union Budget Makes Amendments Pertaining to Individuals, Employers

Highlights of Budget’s Personal Tax Measures

These changes, if enacted as such, would apply from 1 April 2025 or dates specified therein.

• Income tax slabs and rates – The tax rates and income slabs have been revised under the new tax regime.  Also, the income threshold for the rebate under the new tax regime has been enhanced from    INR 700,000 to INR 1,200,000 (excluding income taxable at special rates, e.g., capital gains, etc.).  For more information, on changes under the new tax regime, please refer to the “Additional Detail on Key Rates and Slabs” section below.  However, the income tax slabs, rates, surcharge, and cess remain unchanged for individuals under the optional old tax regime. 
• Proceeds from life insurance – It is proposed to exempt proceeds (including any sum allocated by way of a bonus) received from life insurance policies issued by insurance intermediary offices located in an International Financial Services Centre (IFSC), with no underlying conditions. 
• Contributions towards the National Pension Scheme – The existing deduction limit of INR 50,000 available for contributions towards the National Pension Scheme (NPS), under the old tax regime, is now proposed to be extended to include contributions made by a parent or guardian to the NPS Vatsalya account of the minor.  Further, a partial withdrawal up to 25 percent for specified reasons from the minor’s account shall not be taxable in the hands of the parent / guardian.
• Perquisites and income threshold – It is proposed to revise the income threshold to determine taxability of the below-noted perquisites:
  • the value of any benefit or amenity provided free-of-cost or at a concessional rate to an employee, not being a director or a person having substantial interest in the company, and whose salary exceeds the specified threshold (current threshold is INR 50,000);
  • the expenditure incurred by the employer towards medical treatment outside India where the employee’s gross total income exceeds the specified threshold (current threshold is INR 200,000).
• Classification of property – The conditions for considering the annual value as NIL for self-occupied property have been relaxed.
• Unit Linked Insurance Plans (ULIPs) – All ULIPs, for which a tax exemption is not available, will be treated as a capital asset at par with an equity-oriented fund.  Any gain on redemptions of such ULIPs shall be taxed as capital gains.
• Withdrawals from the National Savings Scheme – Any amount withdrawn from the National Savings Scheme (NSS) on or after 29 August 2024, will not be taxable.
• Time to file an updated tax return – The time limit to file an updated tax return is proposed to be extended to 48 months from the existing 24 months.  In such cases, the taxpayer is required to pay additional tax of 60 percent and 70 percent respectively (on aggregate of incremental tax and interest) if such return is filed after the expiry of 24 months and 36 months from the end of the Assessment Year (AY) respectively.  The proposed amendment is applicable from AY 2025-26, hence relevant for tax returns for AY 2021-22 onwards.
• Tax Deduction at Source – It is proposed to rationalise certain rates of Tax Deduction at Source (TDS) and to increase the threshold limit for applicability of certain TDS provisions.
• Tax Collection at Source (TCS)
  • Threshold for TCS on remittances under the Liberalised Remittance Scheme is proposed to be increased to INR 10 Lakh from the existing INR 7 Lakh;
  • No TCS on a remittance for education purposes, where such remittance is funded through a loan obtained from a specified financial institution.

Taxation of Virtual Digital Assets

The Definition of ‘Virtual Digital Asset’ has been expanded to include any crypto asset, defined as a digital representation of value that relied on a cryptographically-secured distributed ledger or a similar technology to validate and secure transactions.  Further, transactions in crypto assets are to be reported to the Income-tax authorities by the prescribed Reporting Entity (w.e.f. 1 April 2026).

Additional Detail on Key Rates/Slabs

New Tax Regime - Section 115BAC of the Act

Previous

Source: KPMG in India

New

Source: KPMG in India

• Surcharge and cess rates remain unchanged.
• Income threshold for rebate proposed to be enhanced to INR 12 Lakh from existing INR 7 Lakh (excluding income taxable at special rates, e.g., capital gains, etc.) for resident individuals.

Footnotes:

1  For the Budget Speech, see: https://www.indiabudget.gov.in/doc/budget_speech.pdf.

For additional Budget documents and information, see: https://www.indiabudget.gov.in/.

See Ministry of Finance, Summary of Union Budget 2025-26 at: https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2098352.

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INR 1 = GBP 0.00927

INR 1 = EUR 0.01

INR 1 = USD 0.0115

INR 1 = AUD 0.018

INR 1 = ZAR 0.213

Source: www.xe.com 

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