Income Tax Budget 2025 LIVE: The Union Budget 2025 will be read out in a couple of hours. Individuals in India pay various taxes that range from income tax to capital gains tax, Goods and Services Tax (GST), and others.
Broadly, there are two categories of taxes: direct and indirect. Direct taxes are progressive levies, including income tax, wealth tax, and capital gains tax, wherein individuals with greater income or wealth incur higher tax obligations. Indirect taxes are regressive as they impose the same tax burden on all individuals, from affluent industrialists to the impoverished, exemplified by taxes such as goods and services tax (GST), gas tax, or levies on cinema tickets.
How much tax do I have to pay? Calculate now
Here's a quick guide on the taxes we pay:
Direct taxes
> Income Tax
Individuals like salaried taxpayers and senior citizens pay income tax under different categories. Ahead of the Union Budget, there is growing anticipation surrounding potential adjustments to personal income tax policies, particularly for individuals who have chosen the new tax regime. Income tax is levied on individual earnings according to specific income brackets set by the government. There are two distinct tax regimes -- Old Tax Regime and New Tax Regime.
Budget 2025 live updates: FM Sitharaman to table her eighth budget; tax revision on the cards?
Under the New Regime, individuals with annual income up to Rs 3 lakh are exempt from tax. Tax rates gradually increase from 5% for income between Rs 3-6 lakh, up to 30% for earnings exceeding Rs 15 lakh. Under the Old Regime, individuals with income up to Rs 2.5 lakh receive an exemption. A 5% tax rate applies to income between Rs 2.5-5 lakh, 20% for Rs 5-10 lakh, and 30% for earnings over Rs 10 lakh. A rebate of Rs 12,500 is available for those earning up to Rs 5 lakh.
The income-tax department has categorized personal income tax or individual income tax as NCT by merging it with other minor categories, including taxes paid by entities like local authorities and artificial juridical persons. Gross non-corporate tax (NCT), which primarily consists of individual income-tax revenue, witnessed a little over a 22% surge to Rs 9,53,871 crore in 2024-25 (up to December 17) compared to Rs 7,81,737 crore in the same period of the previous year.
> Capital Gains Tax
Active investors frequently realize profits when selling their securities, bonds, or mutual funds. These gains are subject to capital gains tax. In Budget 2024, Finance Minister Nirmala Sitharaman unveiled significant revisions to the Long-Term Capital Gains (LTCG) tax system, increasing the tax rate from 10% to 12.5%. Effective from FY 24-25, the LTCG tax will be imposed on profits exceeding Rs. 1.25 lakh generated from the disposal of listed shares and equity mutual funds. For equity investments, capital gains up to Rs 1.25 lakh per year are exempt from this tax. However, any gains exceeding this threshold will be taxed at a rate of 12.5% for long-term investments in equity/shares.
Short-term Capital Gains (STCG) incur a 15% tax on equities held for less than a year, while Long-term Capital Gains (LTCG) are subject to a 10% tax on profits exceeding Rs 1 lakh from equities held for over a year.
Security Transaction Tax
The Security Transaction Tax (STT) is a tax imposed on the buying and selling of securities such as stocks, mutual funds, and derivatives on recognized stock exchanges within India. STT is considered a direct tax as it is applied directly to the value of the transaction involving securities. STT is applied to transactions made on the stock exchange with the following rates:
Equity Delivery: A rate of 0.1% is charged on both buy and sell transactions. Equity Intraday: A rate of 0.025% is applied on the sell side. Equity Futures: A rate of 0.01% is charged on the sell side. Equity Options: A rate of 0.017% is levied on the sell side, based on the premium. Mutual Fund Units (Equity-Oriented): A rate of 0.001% is charged on the sell side.
Indirect tax
Goods and Services Tax (GST)
The Goods and Services Tax (GST) in India is an indirect tax that applies to goods and services. The Indian GST structure consists of multiple rates, including 0%, 5%, 12%, 18%, and 28%, along with special rates of 0.25% and 3%, as well as a cess ranging from 1-15% on demerit and luxury goods. Over the past eight years, significant changes have been made to the GST system, streamlining procedures and improving tax revenue for both the Union and state governments.
As updates to the GST law are typically initiated by recommendations from the GST Council, the Union Budget's influence in this area has diminished. Nevertheless, businesses in India continue to view the Budget as an opportunity to advocate for broader indirect tax reform, moving towards a simpler and more unified rate structure known as GST 2.0.
Other taxes
Excise Tax: Imposed on the production of goods, especially for petroleum and tobacco products. Customs Tax: Applied to imported goods, with rates differing by product type. Professional Tax: State governments levy this tax on professions, trades, and employment, usually capped at Rs 2,500 annually in most states.