The new financial year 2025-26 has brought significant changes to India’s income tax rules, impacting salaried individuals, investors, and taxpayers.
The government has introduced revised tax slabs, increased deductions, and updated TDS (Tax Deducted at Source) thresholds to simplify tax compliance and provide financial relief.
In Budget 2025, the government announced several measures to make tax filing easier while reducing the overall tax burden.
One of the most significant changes is that individuals earning up to ₹12 lakh annually under the new tax regime will not have to pay any income tax.
Additionally, senior citizens and investors will benefit from higher TDS thresholds, while self-occupied property owners will find tax calculations more straightforward.
Let’s take a detailed look at the key income tax changes effective from April 1, 2025.
Revised Income Tax Slabs Under New Regime
The government has amended the income tax slabs under the new tax regime for FY 2025-26. The revised structure is as follows:
- Income up to ₹4 lakh – No tax
- ₹4,00,001 to ₹8 lakh – 5% tax
- ₹8,00,001 to ₹12 lakh – 10% tax
- ₹12,00,001 to ₹16 lakh – 15% tax
- ₹16,00,001 to ₹20 lakh – 20% tax
- ₹20,00,001 to ₹24 lakh – 25% tax
- Income above ₹24 lakh – 30% tax
Zero Tax on Income Up to ₹12 Lakh
One of the biggest tax relief measures introduced in Budget 2025 is the complete exemption of income tax for individuals earning up to ₹12 lakh under the new tax regime. However, taxpayers must file an Income Tax Return (ITR) to avail of this benefit under Section 87A.
Additionally, salaried individuals can claim a standard deduction of ₹75,000, effectively making income up to ₹12.75 lakh tax-free.
To prevent unfair taxation, the government has introduced marginal relief, ensuring that those earning slightly above ₹12 lakh pay tax only on the excess amount rather than the entire income.
Higher TDS Thresholds for Senior Citizens and Investors
The government has revised TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) thresholds to reduce tax liabilities and improve cash flow for taxpayers. Key changes include:
- For senior citizens: The TDS threshold on bank interest has been doubled from ₹50,000 to ₹1 lakh, ensuring they retain more of their earnings.
- For other individuals: The TDS threshold for interest on bank deposits has been increased to ₹50,000.
- Dividend Income: The TDS threshold has been raised to ₹10,000, which is twice the previous limit.
- Overseas Remittances: The TCS threshold has been increased from ₹7 lakh to ₹10 lakh.
These revised limits will reduce unnecessary deductions and simplify tax compliance for senior citizens and investors seeking liquidity.
Simplified Tax Calculation for Self-Occupied Properties
The government has also made tax filing easier for homeowners. Taxpayers can now declare the value of up to two self-occupied properties as zero, simplifying tax calculations and reducing compliance burdens.
Impact of New Income Tax Rules on Middle-Class Households
With annual incomes up to ₹12 lakh now tax-free, middle-class families are expected to see higher disposable incomes, which can lead to increased household savings and consumer spending.
Financial experts believe that these tax reforms will encourage investment, enhance purchasing power, and simplify tax compliance for salaried professionals, business owners, and senior citizens.
Comparison: Old vs. New Tax Regime
| Aspect | Old Tax Regime | New Tax Regime (FY 2025-26) |
|---|---|---|
| Income tax exemption limit | ₹2.5 lakh | ₹4 lakh |
| Standard Deduction | ₹50,000 | ₹75,000 |
| 5% tax slab | ₹2.5-5 lakh | ₹4-8 lakh |
| 10% tax slab | ₹5-7.5 lakh | ₹8-12 lakh |
| 15% tax slab | ₹7.5-10 lakh | ₹12-16 lakh |
| 20% tax slab | ₹10-12.5 lakh | ₹16-20 lakh |
| 25% tax slab | ₹12.5-15 lakh | ₹20-24 lakh |
| 30% tax slab | Above ₹15 lakh | Above ₹24 lakh |
This comparison highlights the reduced tax burden under the new tax regime, making it a more attractive option for taxpayers.
Key Takeaways for Taxpayers
- No income tax for individuals earning up to ₹12 lakh under the new regime.
- Higher TDS thresholds for senior citizens, investors, and overseas remittances.
- Increased standard deduction of ₹75,000 for salaried employees.
- Marginal relief provision ensures fair taxation.
- Tax benefits for self-occupied property owners, simplifying tax filing.
Final Thoughts
The revised income tax rules for FY 2025-26 aim to reduce the tax burden, enhance savings, and simplify compliance for taxpayers.
With a higher tax exemption limit and revised slabs, more individuals will benefit from reduced taxes.
To take full advantage of these changes, taxpayers must stay updated on filing deadlines, deductions, and exemptions. Consulting a tax expert or using online tax calculators can help optimize tax savings and ensure compliance.
