Financial planning post-Budget 2025, taking into account new changes

The Union Budget 2025 has introduced several significant changes that will impact personal financial planning for Indian citizens. From tax modifications to new investment schemes, let’s have a look at a guide to help you navigate the changes and optimise your financial strategy. 

Revision of income tax slabs: The new tax regime has revised the income tax slabs considerably. The changes are: 

Income up to Rs 4 lakh: No tax

Rs 4 lakh to Rs 8 lakh: 5 per cent

Rs 8 lakh to Rs 12 lakh: 10 per cent

Rs 12 lakh to Rs 16 lakh: 15 per cent

 

Rs 16 lakh to Rs 20 lakh: 20 per cent

Rs 20 lakh to Rs 24 lakh: 25 per cent

Above Rs 24 lakh: 30 per cent 

In light of the revised tax slabs, taxpayers earning up to Rs 12 lakh receive a rebate ensuring no tax is payable. However, this will not include special rate income like capital gains. For example, a taxpayer with an income of Rs 12 lakh saves Rs 80,000, equating to 100 per cent of their previous tax liability. 

Rationalisation of TDS and TCS rates: 

Under Section 194A, the limit for a tax deduction on interest for senior citizens is being doubled from the present Rs 50,000 to Rs 1 lakh.  ALSO READ: Budget 2025: Govt to table new income tax bill next week, says FM 

Under Section 194I - the annual limit of Rs 2.40 lakhs for TDS on rent is being increased to Rs 6 lakhs. This will reduce the number of transactions liable to TDS, thus benefiting small taxpayers. 

The threshold to collect tax at source (TCS) on remittances under RBI’s Liberalised Remittance Scheme (LRS) is proposed to be increased from Rs 7 lakh to Rs 10 lakh. 

Removal of TCS on remittances for education purposes, where such remittance is out of a loan taken from a specified financial institution. 

Higher TDS deduction will only apply in the case of non-PAN cases.

 

“The period for filing updated returns, ITR-U, has been extended from 2 years to 4 years from the end of the relevant assessment year. For returns filed between 24 to 36 months after the assessment year, an additional tax of 60 per cent is applicable. For those filed between 36 to 48 months, the additional tax increases to 70 per cent,” said Shefali Mudra, tax expert, ClearTax. 

Anirudh Garg, partner and fund manager at Invasset PMS suggests post-Budget financial planning for investors  

Given the tax relief and new income tax slabs, investors should reevaluate their financial strategies. The exemption on income up to Rs 12 lakh under the new regime might make it more attractive for taxpayers compared to the old system, prompting a shift in investment planning. 

Tax planning: High earners (Rs 18 lakh+) benefit from a Rs 70,000 tax reduction, making it wise to assess whether to opt for the new tax regime. With increased TDS limits on rent (Rs 6 lakh) and senior citizen interest deduction (Rs 1 lakh), real estate investments and fixed-income options become more appealing. 

 

Savings & investment strategy: The focus on MSMEs and startups presents an opportunity to invest in businesses that will benefit from government policies. Additionally, critical minerals, infrastructure, and power sector investments offer long-term growth potential. 

“For someone who was still opting for the old regime due to incremental benefit through Chapter VI deductions, other specific exemptions, he must carry out a comparative analysis of their tax under both the new and old tax regimes and choose accordingly. However, one must take note that switching between regimes is restricted for some categories of taxpayers,” said Ritika Nayyar, partner, Singhania & Co.