 "Sitharaman, Budget")
Union Finance Minister Nirmala Sitharaman presented the Union Budget for FY 2025-26 on Saturday (February 1), bringing several key changes across taxation, finance, and investment. To help taxpayers and stakeholders understand the new provisions, the government has released a set of frequently asked questions (FAQs). Here’s a breakdown of the major clarifications provided:
Life Insurance and Unit Linked Insurance Policy (ULIP)
What are the provisions for tax exemption under life insurance policies?
Under Section 10(10D), any amount received under a life insurance policy, including bonuses, is exempt from income tax, provided certain conditions are met.
What are the conditions to claim exemption?
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- For policies issued on or after April 1, 2012, the premium payable must not exceed 10 per cent of the actual sum assured.
- The premium amount should not exceed Rs 2,50,000 for ULIP policies and Rs 5,00,000 for other policies issued after certain dates.
What happens if these conditions are not met?
If the conditions are not met, the sum received:
- For ULIPs: Will be taxed as capital gains.
- For other policies: Will be taxed as income from other sources.
Also Read: Zero income tax upto Rs 12 lakh: Confused about new slabs? Answer here
Finance Bill 2025: Key amendments
How does the Finance Bill 2025 affect ULIPs?
Earlier, if the premium exceeded 10 per cent of the sum assured, there was ambiguity regarding whether the sum received should be taxed as capital gains. The new amendment clarifies that all ULIPs will now follow uniform tax treatment, ensuring consistency.
What are the new provisions for Sovereign Wealth Funds (SWF) and Pension Funds (PF)?
- The deadline for making investments to claim exemptions has been extended from March 31, 2025, to March 31, 2030.
- Long-term capital gains on such investments will continue to be exempt, even if reclassified as short-term under Section 50AA.
Taxation and filing returns
What are the new timelines for filing updated returns?
- A revised return can be filed until December 31 of the assessment year.
- Updated returns (for additional income disclosure) can now be filed up to 48 months from the end of the relevant assessment year, instead of the previous 24 months.
Can a taxpayer file an updated ITR after filing a revised ITR?
Yes, a taxpayer can still file an updated return for any previous year within the 48-month window.
Is the standard deduction available under both tax regimes?
- New tax regime: Rs 75,000 standard deduction.
- Old tax regime: Rs 50,000 standard deduction.
Is rebate available on capital gains and lottery income?
No, rebate is not available on capital gains, lottery winnings, or any income taxed at a special rate under the Income Tax Act. Rebate applies only to income under slab rates (Section 115BAC).
Tax relief under NPS Vatsalya
- Rs 50,000 tax benefit under Section 80CCD(1B) for contributions made by guardians under NPS-Vatsalya.
- 25 per cent withdrawal exemption now extends to NPS-Vatsalya subscribers.
- Tax exemption on accumulated wealth upon the subscriber's death now applies to NPS-Vatsalya.
These provisions will be effective from assessment year 2026-27 onwards.
Kisan Credit Cards (KCC) and agricultural reforms
- The loan limit under KCC has been increased from Rs 3 lakh to Rs 5 lakh under the Modified Interest Subvention Scheme.
- This benefits 7.7 crore farmers, fishermen, and dairy farmers by improving access to short-term credit.
Jan Vishwas Bill: Decriminalisation of laws
What is the Jan Vishwas Bill?
The Jan Vishwas (Amendment of Provisions) Bill, 2023, aims to decriminalise offences across 42 central laws covering 19 ministries.
How are offences decriminalised?
- Removal of imprisonment for some offenses.
- Retaining fines while eliminating jail terms in certain provisions.
- Enhanced monetary penalties as an alternative to criminal punishment.
- Introduction of compounding of offenses for easier legal resolution.
