Union Budget 2025-26: Finance Minister Nirmala Sitharaman announced a range of taxation changes, including for both direct and indirect tax. As part of the indirect taxes, FM Sitharaman announced a rationalisation of customs tariffs, relief on import of drugs and medicines, reduction in basic customs duty for many items, and under direct taxes, rationalisation of TCS and TDS, the announcement of zero tax for income of up to Rs 12 lakh.
“As a result of these proposals, revenue of about Rs 1 lakh crore in direct taxes and Rs 2,600 crore in indirect taxes will be forgone,” stated FM Sitharaman in her Budget 2025 speech.
The minister announced that “there will be no income tax payable up to income of Rs 12 lakh under the new regime”. “This limit will be Rs 12.75 lakh for salaried tax payers, due to standard deduction of Rs 75,000,” she said, adding that the income tax slabs are being changed across the board to benefit all taxpayers.
“The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment,” she said.
FM Sitharaman said that for taxpayers up to Rs 12 lakh of normal income, tax rebate is provided in addition to the benefit due to slab rate reduction in such a manner that there is no tax payable by them.
Rationalising the customs tariff structure, FM Sitharaman removed seven tariff rates, leaving only eight tariff rates, including ‘zero’ rate. No levying of more than one cess or surcharge thereby removing Social Welfare Surcharge on 82 tariff lines that are subject to a cess.
The minister also announced adding 36 lifesaving drugs and medicines to the list of medicines fully exempted from basic customs duty (BCD). Six lifesaving medicines have been added to the list attracting concessional customs duty of 5 per cent.
The minister announced adding 37 more medicines along with 13 new patient assistance programmes is the list of drugs and medicines under Patient Assistance Programmes run by pharmaceutical companies, fully exempt from BCD, provided the medicines are supplied free of cost to patients.
FM Sitharaman fully exempted BCD on cobalt powder and waste, scrap of lithium-ion battery, lead, zinc and 12 more critical minerals, two types of shuttle-less looms. Thirty-five additional capital goods for EV battery manufacturing, and 28 additional capital goods for mobile phone battery manufacturing were added to the list of exempted capital goods among other things.