The income tax is a direct tax which follows a progressive slab rate, where the rate of tax increases as the taxpayer’s income rises. The Income-tax Act, 1961 provides for two tax regimes: the old regime, which allows various deductions and exemptions, and the new regime, which offers lower tax rates without exemptions.

The Budget 2025 Updates

The new Income Tax Bill has been tabled by the Honorable. Finance Minister in the Lok Sabha. It aims to simplification and better presentation of the provisions.

As per the budget 2025, the income up to Rs. 12,00,000 will have zero tax liability for the FY 2025-26 (AY 2026-27) under the new tax regime. Here’s how:

The revised tax slabs under the new regime for FY 2025-26 (AY 2026-27) are as follows:

With the revised tax structure, individuals earning up to Rs. 12,00,000 will have no tax liability due to the increased rebate of Rs. 60,000. For salaried individuals, the tax liability will be zero for incomes up to Rs. 12,75,000, due to the Rs. 75,000 standard deduction.

Note:

The marginal relief on rebate is still applicable.

The rebate is not available for income that is taxed at special rates (e.g., capital gains under section 112A).

Income Tax Slabs for FY 2024-25 (AY 2025-26) Under New Regime

The Budget 2024 introduced significant changes to the tax slabs under the New Tax Regime, which will be applicable for FY 2024-25 (AY 2025-26). Taxpayers can now benefit from revised tax slabs, along with an increased standard deduction and an enhanced family pension deduction.

The revised income tax slabs for FY 2024-25 under the new regime:

Note:

• Rebate: Tax rebate up to Rs.25,000 is applicable if the total income does not exceed Rs. 7,00,000 (not applicable for NRIs). Therefore, no tax for an income up-to Rs.7,00,000.
  • Standard Deduction: The standard deduction for salaried employees is Rs. 75,000 under the new regime.
  • Deduction under Family Pension:The deduction on family pension received has been increased from Rs. 15,000 to Rs. 25,000.
  • NPS Contribution: The deduction limit on employer’s contribution to NPS is 14% for FY 2024-25.

As a result of the above changes, a salaried employee in the new tax regime can save up to Rs. 17,500 in taxes.

The new  regime is the default tax regime.  If individuals want to choose the old regime then they have to file Form 10-IEA. The highest surcharge rate is 25% under the new regime as opposed to 37% in the old regime.