In the Union Budget 2025, significant changes were introduced to the income tax structure under the new tax regime, effective from April 1, 2025 (FY 2025-26). Here’s a summary of the key updates:
Revised Income Tax Slabs:
The new tax regime has restructured the income tax slabs to provide relief to taxpayers:
| Annual Income (₹) | Tax Rate |
| Up to 4,00,000 | Nil |
| 4,00,001 – 8,00,000 | 5% |
| 8,00,001 – 12,00,000 | 10% |
| 12,00,001 – 16,00,000 | 15% |
| 16,00,001 – 20,00,000 | 20% |
| 20,00,001 – 24,00,000 | 25% |
| Above 24,00,000 | 30% |
Additionally, the basic exemption limit has been increased from ₹3 lakh to ₹4 lakh. The standard deduction for salaried individuals has also been raised from ₹50,000 to ₹75,000. Consequently, salaried taxpayers with an income up to ₹12.75 lakh will not have any tax liability, considering the standard deduction and applicable tax rebates.
As per the report of Economic Times:
Enhanced Tax Rebate
The tax rebate under Section 87A has been increased to ₹60,000 from the previous ₹25,000. This means that individuals with a net taxable income up to ₹12 lakh are eligible for a full tax rebate, resulting in zero tax liability.
Deductions and Exemptions
The new tax regime continues to offer limited deductions and exemptions compared to the old tax regime. Notably, the standard deduction of ₹75,000 is available for salaried individuals. However, common deductions such as those under Section 80C (investments in PPF, ELSS, etc.) and Section 80D (health insurance premiums) are not available under the new regime.
It’s important to note that the old tax regime remains an option for taxpayers who prefer to claim various deductions and exemptions. Taxpayers can choose between the old and new tax regimes based on which is more beneficial for their financial situation.
These changes aim to simplify the tax structure and increase disposable income for taxpayers, thereby boosting consumption and economic growth.
