The Union Budget 2025 has brought significant updates to India’s tax structure, impacting individual taxpayers, businesses, and investors. The new rules, effective from 1st April 2025, aim to simplify tax compliance, widen the tax net, and boost government revenue while offering some relief to middle-class earners.
In this blog, we’ll explore the key changes in income tax slabs, TDS (Tax Deducted at Source), and TCS (Tax Collected at Source), along with their implications. We’ll also answer some frequently asked questions (FAQs) to help you understand how these changes affect your finances.
1. Revised Income Tax Slabs – Lower Rates for Some, Higher for Others
The government has restructured income tax brackets to reduce the burden on middle-income groups while ensuring higher earners contribute more.
New Tax Slabs for FY 2025-26 (AY 2026-27)
Income Range (₹)
Old Tax Rate (%)
New Tax Rate (%)
Up to ₹3 lakh
0%
0% (No change)
₹3 lakh – ₹7.5 lakh
5%
5% (No change)
₹7.5 lakh – ₹12.5 lakh
20%
10% (Reduced)
₹12.5 lakh – ₹15 lakh
20%
15% (Slightly reduced)
₹15 lakh – ₹20 lakh
30%
20% (Reduced)
Above ₹20 lakh
30%
30% (No change)
Key Takeaways:
  • Taxpayers earning ₹7.5L–15L benefit the most (rates slashed by 5-10%).
  • No change for super-rich (30% remains for ₹20L+).
  • Surcharge (10-37%) still applies for incomes above ₹50 lakh.
2. Higher TDS Rates – Impacting Rent, Freelancers & Investors
The Budget has increased Tax Deducted at Source (TDS) on certain payments to improve tax compliance.
Major TDS Changes:
✔ Rent Payments (Section 194-I):
  • Old Rate: 10% (if rent > ₹50,000/month).
  • New Rate: 12% (for residential & commercial properties).
  • Impact: Landlords receiving high rents will see slightly lower net income.
✔ Freelancer & Professional Fees (Section 194J):
  • Old Rate: 10% (if payment > ₹30,000).
  • New Rate: 15% (threshold raised to ₹50,000).
  • Impact: Freelancers & consultants will see higher TDS deductions on large invoices.
✔ Fixed Deposits (Section 194A):
  • Senior Citizens: TDS threshold increased from ₹40,000 to ₹50,000/year.
  • Others: No change (₹10,000/year for non-seniors).
3. TCS Hike on Foreign Spending & Investments
The government is tightening tax collection on foreign transactions to curb forex outflows.
Key TCS Changes:
✔ Foreign Travel (Under LRS – Liberalised Remittance Scheme):
  • Old Rate: 5% (above ₹7 lakh/year).
  • New Rate: 10% (applies per transaction).
  • Impact: International trips, education, and medical treatments abroad become costlier.
✔ Foreign Investments & Assets:
  • Old Rate: 5% (above ₹7 lakh/year).
  • New Rate: 20% (if remittance exceeds ₹10 lakh/year).
  • Impact: NRIs, investors in foreign stocks, and property buyers will face higher upfront tax costs.
4. New Deductions & Exemptions – Saving More on Taxes
To balance the stricter TDS/TCS rules, the Budget offers new tax-saving opportunities:
✔ Additional Standard Deduction for Salaried Employees:
  • ₹50,000 extra deduction (over the existing ₹50,000).
  • Total benefit: ₹1 lakh standard deduction.
✔ Higher Medical Expense Deduction for Seniors:
  • Old Limit: ₹50,000.
  • New Limit: ₹75,000 (for senior citizens).
✔ Electric Vehicle (EV) Tax Benefit:
  • Extra ₹1.5 lakh deduction on EV loan interest (under Section 80EEB).
5. Easier Tax Compliance & Faster Refunds
The government is pushing for digital reforms to make tax filing smoother:
✔ Pre-filled ITR Forms:
  • Auto-filled details on salary, interest income, and capital gains.
  • Reduces manual entry errors.
✔ AI-Based Processing:
  • Faster refunds with automated verification.
✔ Lower Penalties for Minor Errors:
  • No penalty if corrections made within 30 days of notice.
FAQs – Budget 2025 Tax Changes
Q1. Will my tax go down under the new slabs?
✅ Yes, if you earn ₹7.5L–15L – Your tax rate drops by 5-10%.
❌ No change if you earn above ₹20L – 30% slab remains.
Q2. How does the higher TCS affect foreign travel?
  • If you spend above ₹7L/year on overseas trips, TCS jumps from 5% to 10%.
Q3. Are freelancers impacted by TDS changes?
  • Yes, TDS on professional fees rises to 15% (if payment > ₹50,000).
Q4. Any new tax-saving options?
  • Yes! Extra ₹50K standard deduction, higher medical claims for seniors, and EV benefits.
Q5. When do these changes start?
  • 1 April 2025 (Financial Year 2025-26).