Income Tax Changes From 1st April 2025: New Income Tax Rules
What Are The Income Tax Changes For FY 2025-26?
Income Tax Slabs for FY 2025-26 (AY 2026-27)
The Budget 2025 proposed new tax slab rates under section 115BAC i.e., the New Tax Regime or the Default Tax Regime. This was to ensure that individuals save more and increase their spending capacity. These revised tax slab rates will be applicable for income earned in FY 2025-26 onwards.
The rebate u/s 87A for taxpayers filing tax returns under the New Tax Regime was increased to Rs. 60,000 from the previous limit of Rs. 25,000. Now the taxpayer can enjoy a tax free income of up to Rs. 12 Lakhs.
This means taxpayers earning income up to Rs. 12 Lakhs will have no tax liability under the new tax regime.
The provisions of TDS have significant changes that will be applicable from April 2025. It was proposed to enhance threshold limits for various TDS sections for both individuals and businesses. The threshold for TDS on interest received by senior citizens was increased to Rs 1 lakh from the previous limit of Rs. 50,000. Similarly, the thresholds for rent and commissions were also increased. The enhanced threshold limits for various TDS sections are given in the below table.
Effective from April 2025, the TDS threshold limits for various sections were increased as follows:
(i) 50,000/- for senior citizens;(ii) 40,000/- in case of others when the payer is the bank, cooperative society and post office(iii) 5,000/- in other cases
(i) 1,00,000/- for senior citizen(ii) 50,000/- in case of others when the payer is a bank, cooperative society and post office(iii) 10,000/- in other cases
194T – Remuneration, Interest and Commission paid to partners
NIL
20,000
Note: Provisions of other TDS sections remain the same.
Changes To Tax Collected At Source (TCS)
The threshold for withholding TCS for overseas remittance through LRS will be increased to Rs. 10 lakhs from the previous limit of Rs. 7 lakhs. Further, there will be no TCS on remittance of educational loans taken from a financial institution. Previously, a TCS of 0.5% was applicable if the remittance exceeded Rs. 7 lakhs.
Note: Provisions of other TCS sections remain the same.
Updated Tax Return: Extension of Time Limit
The deadline for filing an Updated Tax Return was extended from 12 months to 48 months (4 years) from the end of the relevant assessment year. This extension was to encourage the taxpayers to disclose any previously undisclosed incomes and pay relevant taxes on the same.
The additional tax liability based on the timeline of filing an updated return is as follows:
The premium paid on a Life Insurance policy availed from an office in IFSC by non-residents, is completely exempt under section 10(10D) without any maximum premium amount.
Tax Exemption For Start-ups
Under Section 80-IAC, start-ups incorporated before 01.04.2030 will be allowed a 100% deduction of profits and gains for three consecutive years out of ten years from the year of incorporation subject to certain conditions.
Omission Of Section 206AB and 206CCA
From April 2025, both Sections 206AB and 206CCA of the Income Tax Act 1961 will be omitted to reduce the compliance burden on tax deductors/collectors.
Previously, deductors/collectors were required to determine the correct withholding tax by identifying if the recipient has filed tax returns or not. This was a burden as it led to delays in filing TDS and TCS return statements, higher rates, blocking of capital, and compliance burden.
Deduction On Remuneration Paid To Partners
The limit of deduction available to partnership firms and LLPs for remuneration paid to partners is also enhanced. The calculation limits were revised to make way for higher deductions during tax computation.
Rs.3,00,000 or 90% of the book profit, whichever is higher
On the remaining balance of book-profit
60% of the book-profit
Treatment Of ULIPs as Capital Gains
The proceeds from ULPIs whose premium exceeds 10% of the sum assured or Rs. 2.5 Lakhs annually will be treated as capital gains and will be taxed accordingly (20% for STCG and 12.5% for LTCG). The exemption under section 10(10D) for ULIP proceeds will still be applicable where the annual premium is below Rs. 2.5 lakhs or 10% of the sum assured.
Relaxation Of Deemed Let-Out Property Provision
Previously, the annual value of up to two self-occupied properties was deemed to be NIL, if the owner is unable to occupy the property due to employment, business, or professional commitments at a different location. It is now proposed that the annual value of up to two house properties shall be NIL if the owner occupies the house for his own residence or cannot occupy it for any reason.
The Finance Bill 2025, relaxed the condition to determine deemed let-out property by allowing individuals to claim up to two house properties as self-occupied and declare NIL income on such properties without any conditions.
Removal Of Equalisation Levy
A 6% equalisation levy was applicable on digital advertisements when the payment made to a non-resident service provider exceeded Rs. 1 lakh. This levy will be removed from April 1, 2025.
income tax slabs for FY 2024-25 (AY 2025-26) determine the tax rates applicable to different income groups. Taxpayers can choose between the old and new tax regimes, each with its own set of rates and deductions. Understanding these slabs is for planning tax liabilities efficiently.
Latest Update on Income Tax Slabs in India
The income tax structure in India follows two regimes—the old tax regime with deductions and the new tax regime with lower tax rates but fewer exemptions. The government revises tax slabs periodically to align with economic conditions and ease the tax burden on individuals. For FY 2024-25 (AY 2025-26), the new tax regime continues as the default, with taxpayers having the option to switch to the old regime if preferred.
Income Tax Slabs for FY 2025-26 and Ay 2026-27 Under New Tax Regime
The new tax regime, introduced to simplify taxation, follows a structured slab system based on income brackets. As per the latest updates:
Individuals earning up to ₹7 lakh under the new tax regime benefit from a full rebate under Section 87A, effectively making their tax liability zero.
New Income Tax Slabs (FY 2025-26 and Ay 2026-27)
The tax structure remains unchanged from the previous financial year, ensuring continuity for taxpayers. While the new tax regime offers lower rates, the old tax regime provides deductions under various sections like 80C, 80D, and HRA benefits. Choosing between the two depends on individual income, investments, and financial planning preferences.
Tax Saving Under the New Tax Regime
The income tax slabs under the new tax regime have undergone changes over the years to provide tax relief and simplify compliance. The latest proposed changes for FY 2025-26 (AY 2026-27) aim to make the new tax regime more attractive by adjusting slab limits and tax rates. Below is a comparison of the tax slabs for different financial years:
Features of the New Tax Regime (FY 2025-26 and AY 2026-27)
Budget 2025 has revised the income tax slabs and rates under the new tax regime for FY 2025-26 (AY 2026-27). Income up to ₹4 lakh is now exempt, and the updated structure reduces tax liability while keeping the new regime as the default option.
How Is Income Up to Rs 12 Lakhs Tax Free With Examples?
Mitesh Jain, Partner at Economic Laws Practice, stated that if an individual or HUF has an income of up to ₹12 lakh (excluding income taxed at special rates like capital gains on listed equity shares), the tax payable would be zero after applying the rebate under Section 87A.
While income up to ₹12 lakh is effectively tax-free due to the rebate, the tax is still calculated as per slabs, with the rebate reducing the final amount payable.
Tax Liability Breakdown at Different Income Levels
The tax liability under the new regime varies based on income levels after considering applicable tax slabs and rebates. Below is a breakdown of tax payable at different income levels:
With the rebate under Section 87A, the entire ₹60,000 tax liability is eliminated, resulting in zero tax payable for individuals earning up to ₹12 lakh. In comparison, under the old tax regime, an individual earning ₹12 lakh would have paid ₹1,72,500 in taxes.
Income Tax Slab and Rates for FY 2024-25 (AY 2025-26) After Budget 2024
The income tax slabs for FY 2024-25 (AY 2025-26) have been revised after Budget 2024. The 30% tax rate now applies to income above ₹24 lakh instead of ₹15 lakh. There are also discussions on reintroducing deductions to benefit taxpayers.
Budget 2024 has revised the highest tax rate threshold. Previously applicable on income above ₹15 lakh, the 30% tax rate now applies only to incomes exceeding ₹24 lakh under the new tax regime.
The upcoming Budget 2025 is expected to refine the tax structure further, with possible adjustments to deductions and exemptions under the new regime to enhance taxpayer benefits.
Income Tax Slabs and Rates for Financial year 2024-25 under the Old Tax Regime
The old and new tax regimes for FY 2024-25 (AY 2025-26) have different tax rates across income brackets. The new regime offers lower rates for middle-income groups, as shown below:
Old Tax Regime Vs New Tax Regime (FY 2024-25 & AY 2025-26) vs. (FY 2023-24 & AY 2024-25)
The Budget 2024 introduced notable revisions to the tax slabs under the New Tax Regime, effective for FY 2024-25 (AY 2025-26). Taxpayers can take advantage of updated tax rates, an increased standard deduction, and a higher family pension deduction.
Revised Income Tax Slabs for FY 2024-25 (New Tax Regime)
A tax rebate of up to ₹25,000 is available if the total income does not exceed ₹7,00,000 (not applicable to NRIs).
Income Tax Slabs for FY 2024-25 (AY 2025-26) Under Old Regime
There were no modifications to the old tax regime in Budget 2024. The existing tax slabs remain unchanged:
Income Slab (₹)
Tax Rate
Up to ₹2,50,000
Nil
₹2,50,001 – ₹5,00,000
5%
₹5,00,001 – ₹10,00,000
20%
₹10,00,001 and above
30%
Old Tax Regime Slabs and Rates for Individual Taxpayers below 60 years (AY 2025-26, FY 2024-25)
For individuals, HUFs below 60 years, and NRIs, the income tax exemption limit is set at ₹2,50,000. Surcharge and cess apply as per regulations.
Old Tax Regime Slabs and Rates for Senior Citizens Aged 60 to 80 Years (Ay 2025-26, Fy 2024-25)
Income Tax Slab for Individuals Aged 60 to 80 Years
Taxable Income
Tax Rate
Income up to ₹3,00,000
Nil
₹3,00,000 to ₹5,00,000
5%
₹3,00,000 to ₹10,00,000
20%
Above ₹10,00,000
30%
Old Tax Regime Slabs and Rates for Super Senior Citizens Aged over 80 years (AY 2025-26, FY 2024-25)
Income Tax Slab for Super Senior Citizens (80+ Years)
Income up to ₹5,00,000 – Nil
₹5,00,001 to ₹10,00,000 – 20% tax
Above ₹10,00,000 – 30% tax
Individual Taxpayers Aged Less than 60 years Old: New Tax Slabs for AY 2025-26
For individuals under 60 years, the exemption limit stays at ₹2.5 lakh. Senior citizens between 60 and 79 years have a higher exemption threshold of ₹3 lakh, while super senior citizens aged 80 and above enjoy an increased limit of ₹5 lakh. This age-based differentiation remains a key feature of the old tax regime.
Old vs New Income Tax Slabs and Tax Rates for Senior Citizen Taxpayers Aged Between 60 to 80 years
Income Tax Slabs for Hindu Undivided Family (HUF) for AY 2025-2026
The proposed income tax slabs under the new tax regime for FY 2025-26 are structured as follows:
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%
Income Tax Slabs for Non-Resident Individual (AY 2025-26)
The income tax slabs for non-resident individuals for AY 2025-26 remain the same as those applicable to Indian residents below 60 years. However, NRIs are not eligible for the higher exemption limits provided to senior and super senior citizens. The applicable slabs are:
Up to ₹2,50,000 – Nil
₹2,50,001 – ₹5,00,000 – 5%
₹5,00,001 – ₹10,00,000 – 20%
Above ₹10,00,000 – 30%
Surcharge and cess apply based on income levels.
Tax Slabs for Domestic Company for AY 2025-26
Domestic companies are subject to income taxbased on their annual turnover and the chosen tax regime. The tax slabs for AY 2025-26 are as follows:
New manufacturing companies under Section 115BAB – 15%
Surcharge and cess are applicable as per prescribed limits.
What are the Exemptions/Deductions Unavailable under the New Tax Regime in FY 24-25?
The new tax regime offers lower tax rates but removes various exemptions and deductions available under the old tax system. Some key exemptions and deductions that cannot be claimed under the new regime for FY 2024-25 include:
Differences in Available Deductions Between the Old Tax Regime and the New Tax Regime
The major difference between the two regimes lies in the availability of deductions and exemptions:
Old Tax Regime: Allows deductions under Sections 80C, 80D (health insurance), 80E (education loan), HRA, LTA, home loan interest, and more.
New Tax Regime: Offers lower tax rates but does not allow most deductions, except for the standard deduction of ₹50,000 for salaried individuals and deductions for employer contributions to NPS.
Income Tax = (Taxable Income × Applicable Tax Rate) – Tax Rebate
How to know which Income Tax Slab you Fall in?
To determine your income tax slab, identify your total taxable income after deductions. Compare it with the applicable tax slabs for your age and residency status. Apply the corresponding tax rate to calculate your tax liability.
Conclusion:
The income tax slabs for FY 2024-25 (AY 2025-26) include the old and new tax regimes. The new tax regime offers lower rates but fewer exemptions, while the old regime allows deductions. Budget 2024 revised the highest 30% tax rate for income above ₹24 lakh. Possible future deductions in the new regime may increase its appeal.
The new tax regime exempts income up to ₹4 lakh, with rates from 5% to 30%. Section 87A rebates ensure no tax for income up to ₹12 lakh. These changes simplify compliance and reduce tax burdens for many. Taxpayers benefiting from deductions may still prefer the old regime. Get expert assistance for tax filing and compliance to ensure accuracy. Choose the right tax regime, maximise savings, and avoid penalties. Simplify the process with professional support to your needs.
