Union Budget 2025: Simplified Income Tax System and Senior Citizen Relief

In a significant move to overhaul the income tax framework, Union Finance Minister Nirmala Sitharaman revealed plans for a new Income Tax Bill during her budget speech in the Lok Sabha. The announcement, made as part of the 2025-26 annual budget, indicates a clear shift towards a more simplified tax system. Sitharaman emphasized the government's intent to adopt a "trust first, verify later" approach, aiming to halve the current income tax provisions and overhaul both the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) processes.

To benefit senior citizens, the finance minister disclosed enhancements in the TDS threshold for various sources of income. Specifically, the limit on interest income eligible for TDS for seniors has been doubled from ₹50,000 to ₹1 lakh. Similarly, the threshold for TDS on rental income has seen a substantial increase from ₹2.4 lakh to ₹6 lakh. These changes promise to ease the tax burden on older taxpayers, providing them with more disposable income.

Additionally, Sitharaman announced extensions to the time limits for filing income tax returns. Taxpayers will now have up to four years to file updated returns for any assessment year, a significant increase from the previous two-year limit. This extension is likely to offer more flexibility and reduce the stress associated with tax filings. Furthermore, in a move to support higher education, the minister revealed that TCS will no longer apply to loans obtained for this purpose.

The introduction of this new bill next week in Parliament is poised to significantly simplify the income tax landscape in India. By reducing the complexity of tax provisions and enhancing the ease of compliance, the government aims to foster a more taxpayer-friendly environment. This initiative underscores the government's commitment to streamlining tax administration and ensuring a more efficient and effective tax system.

Concluding, the central government's decision to revamp the income tax system through the proposed bill reflects a forward-thinking approach to taxation. With measures aimed at simplifying tax compliance, providing relief to senior citizens, and supporting educational endeavors, this move is anticipated to bring about positive changes for taxpayers across the board.