The Union Budget 2025-26, themed “Sabka Vikas,” introduces significant reforms aimed at accelerating growth, promoting inclusive development, and enhancing the financial well-being of India’s middle class. Understanding these changes is crucial for effective personal finance and planning.

Income Tax Reforms: Increased Exemptions and Reduced Rates

To boost household consumption and savings, the budget has implemented notable changes to personal income tax:

Higher Tax Exemption Limit: Individuals earning up to ₹1.2 million annually (₹100,000 per month) are now exempt from income tax under the new regime.

Standard Deduction for Salaried Employees: Salaried taxpayers are entitled to a standard deduction of ₹75,000, effectively raising their tax-free income to ₹1.275 million.

Revised Tax Slabs: Income above ₹1.2 million is subject to reduced tax rates, providing relief across various income brackets. 

Takeaway: These reforms are designed to leave more disposable income in the hands of taxpayers, encouraging increased spending and investment.

Capital Gains and Investment Taxation: Stability Maintained

The budget maintains the existing structure for capital gains taxation:

Unchanged Capital Gains Tax Rates: Both short-term and long-term capital gains tax rates remain the same, providing stability for investors.

Dividend Distribution Tax (DDT): No new taxes have been introduced on dividends, ensuring consistent returns for shareholders.

Takeaway: Investors can continue with their current strategies without immediate concern for increased tax liabilities on investments.

Enhancements in Small Savings Schemes

To promote savings among the general populace, the budget has introduced favorable changes:

Increased Interest Rates: Government-backed schemes like Public Provident Fund (PPF) and National Savings Certificate (NSC) have seen a modest hike in interest rates.

Senior Citizens’ Savings Scheme (SCSS): The investment cap for SCSS has been raised, allowing senior citizens to benefit from higher secured returns.

Takeaway: These adjustments make small savings schemes more attractive, encouraging long-term financial planning.

Goods and Services Tax (GST) Adjustments: Impact on Daily Expenses

The budget proposes several changes to GST rates affecting everyday commodities:

Reduced GST on Essential Items: Basic food items and healthcare products have seen a reduction in GST rates, aiming to lower the cost of living.

Increased GST on Luxury Goods: High-end electronics and luxury automobiles now attract higher GST, promoting equitable taxation.

Takeaway: Consumers may experience a decrease in expenses on essential goods, while luxury items become more expensive.

Real Estate and Housing: Incentives for Homebuyers

The budget introduces measures to stimulate the housing sector:

Enhanced Tax Deductions on Home Loans: The deduction limit on home loan interest has been increased, making home ownership more affordable.

Affordable Housing Initiatives: Additional subsidies and tax benefits are provided for first-time homebuyers in the affordable housing segment.

Takeaway: Prospective homebuyers have greater financial incentives, making it an opportune time to invest in property.

Support for Entrepreneurs and Startups

Recognizing the role of startups and MSMEs in economic growth, the budget offers:

Tax Holidays for Startups: Eligible startups can avail tax exemptions for an extended period, easing initial financial burdens.

Simplified Compliance: Reduction in regulatory compliances and easier access to credit for MSMEs.

Takeaway: These measures aim to foster innovation and entrepreneurship by providing a conducive financial environment.

The Union Budget 2025-26 presents several opportunities for individuals to optimize their finances:

Review and Adjust Tax Planning: Utilize the increased exemption limits and deductions to minimize tax outgo.

Reevaluate Investment Portfolios: Consider the stability in capital gains taxation and enhanced small savings schemes for balanced investment choices.

Stay Informed on GST Changes: Adjust household budgets to reflect the revised GST rates on various goods.

For personalized advice and to navigate these changes effectively, connect with KSL today.