With the beginning of the new financial year on April 1, many important changes in the Income Tax rules will come into effect, providing relief to taxpayers across India. The changes announced by Finance Minister Nirmala Sitharaman in the Union Budget 2025 are aimed at simplifying the tax system and benefitting salaried employees.
Major Changes Under the New Tax Regime
A significant change is the increase in the tax-free income limit. From April 1, individuals earning up to Rs 12 lakh annually will no longer be required to pay any income tax, an increase from the previous limit of Rs 7 lakh. Additionally, salaried employees will benefit from a standard deduction of Rs 75,000, effectively raising the tax-free income limit to Rs 12.75 lakh. It’s important to note that this exemption does not apply to capital gains, which will continue to be taxed separately.
Revised Tax Slabs
The government has also revised the tax slabs under the new tax regime, while the old tax regime remains unchanged:
- Income up to Rs 4 lakh: Tax-free
- Income between Rs 4 lakh and Rs 8 lakh: Taxed at 5%
- Income from Rs 8 lakh to Rs 12 lakh: Taxed at 10%
- Income from Rs 12 lakh to Rs 15 lakh: Taxed at 15%
- Income from Rs 15 lakh to Rs 24 lakh: Taxed at 20%
- Income above Rs 24 lakh: Taxed at 30%
Increased Exemption Limits
The exemption limit under Section 87A has also been raised from Rs 25,000 to Rs 60,000, benefitting individuals with income up to Rs 12 lakh under the new tax regime. When combined with the standard deduction, this change effectively elevates the tax-free income limit to Rs 12.75 lakh. The amendments will not affect the old tax regime.
Changes in TDS and Employer Benefits
Another notable update is the increase in the limit of tax deduction at source (TDS) on bank interest. The TDS limit has been increased from Rs 40,000 to Rs 50,000, meaning interest income up to Rs 50,000 will no longer be subjected to TDS deduction.
From April 1, benefits and allowances provided by employers will no longer be classified as taxable perks. Moreover, if the employer covers the cost of medical treatment abroad for an employee or their family, this expense will not be considered a taxable benefit.
Extended Time for Filing Returns
Taxpayers will now have four years instead of two to file updated income tax returns (ITR-U). This extension allows individuals to rectify errors or omissions in their tax filings for a longer period of time.
New Tax Saving Option for Parents
A new tax-saving option has been introduced for parents. Those who contribute to their child’s NPS Vatsalya account can claim an additional deduction of Rs 50,000 under the old tax regime.
Stay informed and plan your finances accordingly as these new changes take effect from April 1!