New Budget to Be Implemented from Tomorrow: Income Up to ₹12 Lakh Tax-Free, Tax on Insurance Plans Linked to the Stock Market – 6 Key Changes

The new budget will come into effect from April 1, 2025. This means that the announcements made by the government during the budget presentation on February 1 will now be implemented. However, the benefits of various schemes will depend on their type and the implementation process.

Tax exemptions and subsidies will be applicable from April 1, 2025, as they are linked to the financial year. On the other hand, infrastructure projects and social welfare schemes may take time to materialize due to the long execution process.

6 Major Changes Coming into Effect from Tomorrow

1. Changes in Tax Slabs: New 25% Slab for Income Between ₹20-24 Lakh

• What’s Changing: Under the new tax regime, income up to ₹12 lakh will now be tax-free. With a standard deduction of ₹75,000, salaried individuals can effectively enjoy tax exemption up to ₹12.75 lakh. A new 25% tax slab has been introduced for incomes ranging from ₹20 to ₹24 lakh.
  
• Impact: Previously, the highest tax rate of 30% applied to incomes above ₹15 lakh. Now, this limit has been raised to ₹24 lakh, providing tax relief to middle and upper-middle-income groups.
  

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

• What’s Changing:
  
  • TDS exemption on rental income has been raised from ₹2.4 lakh to ₹6 lakh.
    
  • Senior citizens’ interest income exemption on bank FDs has been doubled from ₹50,000 to ₹1 lakh.
    
  • TDS limit on professional services has been increased from ₹30,000 to ₹50,000.
    
• Impact: This will reduce the tax burden on individuals with lower incomes and improve cash flow.

3. Higher TCS Limit for Studying Abroad: No Tax on Transfers Up to ₹10 Lakh

• What’s Changing: The Tax Collected at Source (TCS) exemption for sending money abroad for education has been raised from ₹7 lakh to ₹10 lakh. If the money is taken as a loan from a financial institution, no TCS will be applied.
  
• Impact: Families of students studying abroad will benefit as earlier amounts above ₹7 lakh attracted TCS of 0.5% to 5%. Now, up to ₹10 lakh can be transferred tax-free.
  

4. More Time to File Updated Tax Returns: Now Allowed Up to 48 Months

• What’s Changing: Taxpayers can now file updated income tax returns within 48 months instead of the earlier 24 months. However, additional tax penalties will apply:
  
  • 60% additional tax for filings within 36 months
    
  • 70% additional tax for filings between 36-48 months
    
• Impact: This gives taxpayers more time to correct errors, encouraging voluntary compliance.
  

5. Capital Gains Tax on ULIP Plans Above ₹2.5 Lakh Premium

• What’s Changing: If the annual premium of a Unit Linked Insurance Plan (ULIP) exceeds ₹2.5 lakh, it will now be considered a capital asset, and capital gains tax will apply on withdrawals.
  
  • For ULIPs held over 12 months – 12.5% Long-Term Capital Gains (LTCG) tax will apply.
    
  • For ULIPs held under 12 months – 20% Short-Term Capital Gains (STCG) tax will apply.
    
• Impact: High-income individuals who used ULIPs as tax-free investment tools will now have to pay taxes.
  

6. Custom Duty Revisions: Prices of 150-200 Products Affected

• What’s Changing: The government has revised custom duties on various products, impacting 150-200 items. Some will become cheaper, while others will become more expensive.
  
• Cheaper Items:
  
  • Luxury imported cars above ₹40 lakh or 3000cc engine capacity
    
  • Imported motorcycles with engines under 1600cc
    
  • 36 life-saving medicines
    
  • Electric Vehicles (EVs) due to tax exemption on battery production equipment
    
  • Mobile phone battery manufacturing components
    
• More Expensive Items:
  
  • Smart meters, solar cells, imported footwear, imported candles, imported yachts, PVC flex sheets and banners, LCD/LED TVs, and specialized fabrics.
    

When Will Budget Scheme Benefits Be Available?

• Social welfare schemes like cash assistance for farmers and women’s empowerment programs may begin by June-July.
  
• Infrastructure projects such as roads, railways, schools, and hospitals will take longer due to planning, tendering, and construction processes.
  

The Budget Implementation Process in 7 Steps

1. Budget Preparation – The Finance Ministry prepares the budget with inputs from various ministries and experts.
   
2. Budget Presentation – The Finance Minister presents it in Parliament on February 1.
   
3. Parliamentary Discussion – Both the Lok Sabha and Rajya Sabha discuss and debate the proposals.
   
4. Appropriation Bill – After discussions, the government seeks approval to withdraw funds from the Consolidated Fund of India.
   
5. Finance Bill – Tax proposals are formalized into law after discussion and approval.
   
6. Presidential Approval – After passing both houses, the bill is sent for the President’s approval.
   
7. Implementation – The budget takes effect from April 1, 2025, marking the start of the financial year.
   

This budget brings significant changes for taxpayers, investors, and businesses. The modifications in tax slabs, TDS, TCS, and insurance taxation will have a direct impact on financial planning for individuals and corporations.