New Tax Regime 2025: Updated Income Tax Slabs & Budget Highlights
New Tax Regime 2025: On February 1, 2025, Finance Minister Nirmala Sitharaman presented India’s Union Budget for the fiscal year 2025-26. A significant focus was on revising the income tax structure to benefit the middle class and stimulate economic growth.
Table of Contents
New Income Tax Slabs for FY 2025-26 (AY 2026-27):
The government introduced new income tax slabs under the new tax regime:
- Income up to ₹4 lakh: No tax
- ₹4 lakh to ₹8 lakh: 5%
- ₹8 lakh to ₹12 lakh: 10%
- ₹12 lakh to ₹16 lakh: 15%
- ₹16 lakh to ₹20 lakh: 20%
- ₹20 lakh to ₹24 lakh: 25%
- Above ₹24 lakh: 30%
These changes aim to reduce the tax burden on individuals and encourage spending.
Increased Tax Rebate:
The budget raised the tax rebate limit under Section 87A from ₹7 lakh to ₹12 lakh. This means individuals with an annual income up to ₹12 lakh will not have to pay any income tax. This move is expected to benefit a large number of taxpayers.
Comparison with Old Tax Regime:
The old tax regime had different slabs and allowed various deductions. In contrast, the new tax regime offers lower tax rates but with limited deductions. Taxpayers can choose between the old and new regimes based on their financial situations.
TDS on Rent:
The budget increased the threshold for Tax Deducted at Source (TDS) on rent payments from ₹2.4 lakh to ₹6 lakh per annum. This change will reduce the number of transactions liable for TDS, benefiting small taxpayers receiving rental income.
Standard Deduction:
The standard deduction remains available in the new tax regime. This provides relief to salaried individuals by reducing their taxable income.
Income Tax Calculator:
Taxpayers can use the updated income tax calculator to determine their tax liability under the new regime. This tool helps in comparing the tax payable under both the old and new regimes, assisting individuals in making informed decisions.
Estimated Tax: ₹0
Budget Highlights 2025:
The 2025 budget focuses on:
- Reducing the fiscal deficit to 4.4% of GDP.
- Stimulating economic growth through tax reforms.
- Providing relief to the middle class.
- Encouraging private investment.
These measures aim to boost consumption and savings among citizens.
Conclusion:
The new tax regime for 2025 introduces significant changes aimed at benefiting taxpayers and stimulating the economy. Individuals should assess their financial situations to choose between the old and new tax regimes. The government’s focus on tax reforms reflects its commitment to inclusive growth and economic stability.
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