As we all know our finance Minister Nirmala Sitharaman presented the union budget 2025–26 on 1st Feb. and it introduced some crucial reforms in income tax payroll and compliance for MSMEs and start-ups. So today in this blog we will discuss the key points which are relevant to HR. And with that we will also highlight the impact on payroll and income tax.
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Revised tax slabs:
So there is great news for the employees, whose salary is up to 12.75 lakhs they are free from income tax. This will reduce the tax burden from the employees.
So HR needs to update their payroll structures in order to make accurate updates. But if you are using a good payroll softwares then it will ensure automatic adjustment in payroll helping you remain updated with the revised tax slabs.
Impact on employers:
- This will improve employee retention and workplace management morale.
- Payroll team is required to update the salary structure, CTC breakdown and TD calculation.
2. TDC and TCS reforms
Higher TDS thresholds on:
- Interest for senior citizens – has increased from 50,000 to 1,00,000.
- Rent – jumped from 2.4,00,00 to 6 lakhs annually
- Dividend income – TDS threshold raised to 10,000.
- TCS removed from education loan.
As a result of the following above changes HR and the finance team must align payroll calculation as per the reforms.
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Enhancement in social security for Gig workers
No gig workers will get health insurance as per the PM Jan Arogya Yojana. Not only this but they will also get formal identity cards which will enable them to get better financial inclusions.
So HR needs to update their policies for gig and contract-based workers. Payroll teams should also include these new benefits in their payroll process.
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Providing financial support to MSMEs and start-ups
Investment and turnover limits raised by 2.5x and 2x boosting growth without losing benefits.
| MSME Type | Old Investment Limit | New Investment Limit |
| Micro Enterprises | ₹ 1 Crore | ₹2.5 Crores |
| Small Enterprises | ₹ 10 Crores | ₹25 Crores |
| Medium Enterprises | ₹ 50 Crores | ₹125 Crores |
| MSME Type | Old Turnover Limit | New Turnover Limit |
| Micro Enterprises | ₹ 5 Crore | ₹10 Crores |
| Small Enterprises | ₹ 50 Crores | ₹100 Crores |
| Medium Enterprises | ₹ 250 Crores | ₹500 Crores |
- Funding for start-ups and entrepreneurs
The union budget 2025 has introduced key incentives for start-ups. Not only this but also allocated capital to start up fund of funds. Tax exemption for start-ups has been extended to March 31, 2030. The start-up credit guarantee limit has also been increased from 1 crore to 2 crore giving financial support.
With this increased funding businesses can invest in HR technologies that can provide them with advanced features and can give improved efficiency and productivity.
Simplified corporate tax and reforms
The coming income tax Bill aims to simplify corporate taxation while Jan Vishwas Bill 2.0 Disk criminalises minor business offenses. The digitalization of taxation reduces the HR workload. And the centralized KYC registry streamlines the business compliance.
Conclusion
The union budget 2025 gives significant tax relief for employees. It also eases the compliance for businesses and improves credit access for MSME. A trusted HRM software can make the whole process smooth by automating solutions and by providing real-time updates.