LLP vs Company: Which is Better for Ease of Doing Business in India?
November 19, 2024
Let’s decode Budget 2025 Tax Changes as it introduces significant changes in direct and indirect taxes, including revised income tax rates, investment incentives, and socio-economic welfare measures. With new GST and customs updates, simplified tax administration, and measures to boost employment and growth, these reforms aim to foster economic progress and ease compliance for businesses and individuals. Read below to find out more about Budget 2025 Direct and Indirect Tax Changes.
Direct Tax Changes
Income Tax Rates
The Budget proposes new income tax slabs for Assessment Year 2026-27, with changes in the existing tax regime. The new slabs offer a lower tax rate for the first ₹4 lakh and a higher rebate under Section 87A, up to ₹60,000.
Zero income tax till Rs 12 Lakh Income under New Tax Regime
| Proposed Tax Slabs in New Tax Regime | Rate of Tax |
| Upto Rs. 4,00,000 | Nil |
| From Rs. 4,00,001 to Rs. 8,00,000 | 5% |
| From Rs. 8,00,001 to Rs. 12,00,000 | 10% |
| From Rs. 12,00,001 to Rs. 16,00,000 | 15% |
| From Rs. 16,00,001 to Rs. 20,00,000 | 20% |
| From Rs. 20,00,001 to Rs. 24,00,000 | 25% |
| Above Rs. 24,00,000 | 30% |
Tax benefit for different categories of taxpayers
| Total Income | Tax as per existing rates (Finance (No.2) Act, 2024) | Tax as per proposed rates | Benefit of Rate/Slab (4) = (3) – (2) | Rebate Benefit (5) | Total Benefit (6) = (4) + (5) | Tax Payable under new regime (7) |
| 8 lac | 30,000 | 20,000 | 10,000 | 20,000 | 30,000 | 0 |
| 9 lac | 40,000 | 30,000 | 10,000 | 30,000 | 40,000 | 0 |
| 10 lac | 50,000 | 40,000 | 10,000 | 40,000 | 50,000 | 0 |
| 11 lac | 65,000 | 50,000 | 15,000 | 50,000 | 65,000 | 0 |
| 12 lac | 80,000 | 60,000 | 20,000 | 60,000 | 80,000 | 0 |
| 13 lac | 1,00,000 | 75,000 | 25,000 | 0 | 25,000 | 75,000 |
| 14 lac | 1,20,000 | 90,000 | 30,000 | 0 | 30,000 | 90,000 |
| 15 lac | 1,40,000 | 1,05,000 | 35,000 | 0 | 35,000 | 1,05,000 |
| 16 lac | 1,70,000 | 1,20,000 | 50,000 | 0 | 50,000 | 1,20,000 |
| 17 lac | 2,00,000 | 1,40,000 | 60,000 | 0 | 60,000 | 1,40,000 |
| 18 lac | 2,30,000 | 1,60,000 | 70,000 | 0 | 70,000 | 1,60,000 |
| 19 lac | 2,60,000 | 1,80,000 | 80,000 | 0 | 80,000 | 1,80,000 |
| 20 lac | 2,90,000 | 2,00,000 | 90,000 | 0 | 90,000 | 2,00,000 |
| 21 lac | 3,20,000 | 2,25,000 | 95,000 | 0 | 95,000 | 2,25,000 |
| 22 lac | 3,50,000 | 2,50,000 | 1,00,000 | 0 | 1,00,000 | 2,50,000 |
| 23 lac | 3,80,000 | 2,75,000 | 1,05,000 | 0 | 1,05,000 | 2,75,000 |
| 24 lac | 4,10,000 | 3,00,000 | 1,10,000 | 0 | 1,10,000 | 3,00,000 |
| 25 lac | 4,40,000 | 3,30,000 | 1,10,000 | 0 | 1,10,000 | 3,30,000 |
| 50 lac | 11,90,000 | 10,80,000 | 1,10,000 | 0 | 1,10,000 | 10,80,000 |
Measures to Promote Investment and Employment
Incentives to International Financial Services Centre
- Extension of Sunset Dates – Tax concessions and relocation of funds to IFSC extended to March 31, 2030.
- Exemption on Life Insurance Policies – Proceeds from IFSC insurance intermediary offices exempt from tax.
- Exemption to Capital Gains and Dividend – Exemption extended to ship leasing units in IFSC, similar to aircraft leasing.
- Rationalisation of Definition of ‘Dividend’– Advances or loans between group entities in IFSC not treated as ‘dividend’ if parent entity is listed outside India.
- Relaxed Conditions – Conditions for eligible investment funds and their managers in IFSC rationalized, with relaxed conditions for funds managed by IFSC-based managers starting operations by March 31, 2030.
- Inclusion of Retail Schemes and ETFs – Retail schemes and Exchange
- Traded Funds (ETFs) in IFSC included in the tax neutral relocation regime for funds.
- Extension of Investment Date – Investment deadline for Sovereign Wealth Funds and Pension Funds extended to March 31, 2030.
Simplification and Rationalization
- TCS u/s Sec 206C (1H) removed – The Budget simplifies tax collection at source (TCS) by removing the requirement for sellers to collect TCS on sales exceeding ₹50 lakh.
- TCS – Forest Produce – Only forest produce (excluding timber & tendu leaves) obtained under a forest lease will be subject to TCS at the rate of 2% (earlier 2.5%)
- No higher rates for TDS/TCS – Omission of Sections 206AB and 206CCA, thereby removing the higher TDS/TCS provisions for non-filers with effect from April 1, 2025.
- Virtual Digital Assets – From February 1, 2025, virtual digital assets will be considered undisclosed income, block assessment time limits will extend to 12 months, and Section 158BA rules will be aligned
- ULIP Tax Treatment – ULIPs with premiums exceeding ₹2.5 lakh (not eligible for 10D exemption) will be classified as Capital Assets under Sec 2(14) and included under Equity-Oriented Funds under Sec 112A.
Impact on Businesses and Individuals
Start-up Incentives – The Finance Bill 2025 extends the tax benefits for start-ups under Section 80-IAC by allowing eligibility forstart-ups incorporated up to April 1, 2030.
Capital Gains Tax – The Finance Bill 2025 proposes to align the tax rate for
long-term capital gains(LTCG) on securities for non-residents with residents, increasing it from 10% to 12.5%.
Changes in TDS Thresholds
| S. No | Section | Current Threshold | Proposed Threshold |
| 1 | 193 – Interest on securities | Nil | Rs. 10,000/- |
| 2 | 194A – Interest other than Interest on securities | (i) Rs. 50,000/- for senior citizen; (ii) Rs. 40,000/- for others (when payer is bank, cooperative society and post office); (iii) Rs. 5,000/- in other cases | (i) Rs. 1,00,000/- for senior citizen; (ii) Rs. 50,000/- for others (when payer is bank, cooperative society and post office); (iii) Rs. 10,000/- in other cases |
| 3 | 194 – Dividend for an individual shareholder | Rs. 5,000/- | Rs. 10,000/- |
| 4 | 194K – Income in respect of units of a mutual fund or specified company or undertaking | Rs. 5,000/- | Rs. 10,000/- |
| 5 | 194B – Winnings from lottery, crossword puzzle, etc. | Aggregate of amounts exceeding Rs. 10,000/- during the financial year | Rs. 10,000/- in respect of a single transaction |
| 6 | 194BB – Winnings from horse race | Aggregate of amounts exceeding Rs. 10,000/- during the financial year | Rs. 10,000/- in respect of a single transaction |
| 7 | 194D – Insurance commission | Rs. 15,000/- | Rs. 20,000/- |
| 8 | 194G – Income by way of commission, prize etc. on lottery tickets | Rs. 15,000/- | Rs. 20,000/- |
| 9 | 194H – Commission or brokerage | Rs. 15,000/- | Rs. 20,000/- |
| 10 | 194-I – Rent | Rs. 2,40,000/- during the financial year | Rs. 50,000/- per month or part of a month |
| 11 | 194J – Fee for professional or technical services | Rs. 30,000/- | Rs. 50,000/- |
| 12 | 194LA – Income by way of enhanced compensation | Rs. 2,50,000/- | Rs. 5,00,000/- |
Socio Economic Welfare Measure
- Increased Income Limits for Employee Perks – Income limits for calculating employee perks will increase to match changes in the cost of living and economy.
- Tax Deduction for NPS Vatsalya Accounts – Parents or guardians contributing to NPS Vatsalya accounts can claim a tax deduction of up to ₹50,000 under Section 80CCD.
- Exemption from Taxation for NSS Withdrawals – Exemption from taxation for withdrawals made by individuals from the National Savings Scheme (NSS) for deposits made before April 1, 1992.
- Taxpayers Allowed Two Self-Occupied Properties – Taxpayers can claim the annual value of two self-occupied properties without any conditions.
Tax Administration
- Crypto Reporting – A new section (285BAA) makes it mandatory for reporting entities to share details of crypto transactions with the income tax department.
- Time Limits – The Budget extends the time limit for passing orders under the tonnage tax scheme and for approving the retention of seized books and documents.
- Updated Returns – The time limit to file updated returns (ITR U) has been extended from 24 months months to 48 months from the end of the the relevant assessment year.
- TCS Deadline Extension – The time limit rules for tax collection at source (TCS) under Section 206C have been updated. Now, delays due to court cases and other exclusions will be considered while calculating deadlines
- SUUTI Exemption Extension – The income tax exemption for the Specified Undertaking of Unit Trust of India (SUUTI) has been extended. Instead of expiring on March 31, 2025, it will now be valid until March 31, 2027.
- Penalty Imposition – The power to impose penalties under various tax sections (271C, 271CA, 271D, 271DA, 271DB, and 271E) will now rest with the Assessing Officer instead of the Joint Commissioner
- Processing Time Extension – The processing time for applications requesting immunity from penalties and prosecution has been extended. Instead of one month, authorities will now have up to three months from the date of receiving the application to process it.
INDIRECT TAX CHANGES
ITC Distribution – From April 1, 2025, the distribution of input tax credit (ITC) for inter-state supplies where tax is paid on a on a reverse charge basis will be routed through the Input Service Distributor (ISD).
SEZ Warehousing – The supply of goods warehoused in Special Economic Zones (SEZs) or Free Trade Warehousing Zones (FTWZs) before clearance for export or domestic tariff area is not treated as a supply of goods or services. Effective Retrospectively from 1st July 2017. No Refund will be granted for the taxes already paid
Pre-Deposit for Appeals – A 10% mandatory pre-deposit is required for appeals involving only penalty demands (without tax demands)
Track and Trace Mechanism Sec 116A– The Budget introduces a Unique Identification Marking (UIM) system to monitor the movement of specified goods throughout their supply chain.
Input Service Distributor (ISD) Mechanism
Key Changes: The amendment clarifies that both intra-state and inter-state Reverse Charge Mechanism transactions will be covered under the ISD framework.
Objective: The objective is to explicitly include inter-state RCM transactions under the ISD mechanism, addressing a previously existing limitation.
Clarifying the Scope of Local Authority
Definition Expansion: The amendment clarifies the scope of Local Authority by explicitly defining “local fund” and “municipal fund,” removing ambiguities and uncertainties related to these terms.
Impact: This amendment aims to provide a clearer understanding of the entities that fall under the definition of Local Authority, ensuring consistent application of the GST regime
Track and Trace Mechanism for Goods
Unique Identification Marking: The amendment introduces a Track and Trace Mechanism for evasion-prone commodities, using a Unique Identification Identification Marking (UIM) system to ensure better compliance and control.
Enhanced Traceability: This system will establish a legal framework to facilitate traceability throughout the supply chain, ensuring better compliance and control.
Penalty for Non-Compliance: In case of non-compliance, a penalty as per Section 122B will apply.
Time of Supply for Vouchers
Clarification on Vouchers: The amendment aligns with the Council’s clarification that vouchers are neither goods nor services, eliminating the need for determining their Time of Supply under GST.
Taxable Services: When vouchers are distributed on a principal-to-agent basis, the commission, fee, or any other amount charged by the agent for such distribution remains taxable under GST.
Ancillary Services: Ancillary services related to vouchers, such as advertising, co-branding, marketing and promotion, customization, technology support & customer support, will be subject to GST on the amount charged for these services
Input Tax Credit (ITC) on Plant and Machinery
Amendment: The amendment substitutes “plant or machinery” with “plant and machinery” and inserts a new explanation.
Objective: This amendment aims to overcome the impact of the Supreme Court Judgment in the case of Sarafi Retreats Private Limited, which had provided some relief in case of ITC relating to construction of immovable property.
Retrospective Effect: It shall be deemed that the terms were substituted with effect from 1st July, 2017.
Reversal of ITC in Case of Credit Note Issuance
Amendment: The amendment explicitly states that when a credit note is issued against an invoice where the recipient has availed ITC, the supplier can reverse output tax only if the recipient also reverses the corresponding ITC.
Objective: This amendment aims to ensure fairness and transparency in ITC reversal, aligning the supplier’s and recipient’s obligations.
Impact: This amendment will require both the supplier and recipient to coordinate their actions when credit notes are issued, ensuring a consistent approach to ITC reversal.
Streamlining Invoice Management and GSTR-2B
Invoice Management System: Several clerical amendments have been made to Section 38 to introduce
enabling provisions for streamlining the Invoice Management System and GSTR-2B, ensuring better compliance, accuracy, and efficiency in ITC reconciliation.
GSTR-2B: The amendment aims to enhance the accuracy and efficiency of ITC reconciliation by streamlining the process of communicating details of inward supplies and input tax credit.
Impact: These amendments will contribute to a more robust and efficient GST ecosystem, facilitating smoother compliance and reducing administrative burden.
Customs
✅ Provisional Assessments: A definite time limit of two years is set for finalizing provisional assessments by the proper officer.
✅ Voluntary Post-Clearance Revision: Importers and exporters can now voluntarily revise customs entries within a prescribed time.
✅ Tariff Rate Changes: The Budget introduces new tariff items and adjusts existing rates, including reductions for textiles, marine and agri sectors, and increases for marble and granite, footwear, and solar cells.
✅ Import Concessions: The Budget exempts certain items from import duties, including inputs for handicrafts, medicines and food for special medical purposes, and drugs imported under the Patient Assistance Program.
Disclaimer : Budget 2025 proposals presented by the Finance minister before the parliament are analysed in this Document. It should not be relied upon as substitute for detailed advice or a basis for formulating business decisions. The proposals are subject to amendment as the Finance Bill is yet to be passed by the Parliament. All reasonable care has been taken in preparing the document. Adlakha Kukreja Group accepts no responsibility for any error it may contain, whether caused by negligence or otherwise or for any loss, however, caused or sustained by the person relying on it.
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Source Info: https://incometax.gov.in/
