The tax structure was significantly altered by Finance minister Nirmala Sitharaman in the 2025 Union Budget, which relieved salaried taxpayers who had been anxiously awaiting the revisions. Taxpayers benefited from the announcement of the New Tax Regime's revised tax slabs, rates, and refunds.
 
As part of the revised tax system, new income tax slabs were implemented in Budget 2025.  According to FM Sitharaman, the tax refund under Section 87A has been increased from Rs 25,000 to Rs 60,000, meaning that people with a net taxable income of up to Rs 12 lakh will no longer be subject to taxes.

Additionally, a standard deduction of Rs 75,000 will be available to paid employees.  This implies that tax exemptions are now available for salary income up to Rs12.75 lakh.
 
Subject to parliamentary approval, the new income tax regulations are scheduled to go into effect on april 1, 2025, for the next fiscal year 2025–2026.  Notably, under the new tax structure, the basic deduction threshold of Rs 75,000 will remain unchanged.

New Tax Regime in FY2025-26

New Income Tax Slabs: The threshold for lower tax rates has been increased to Rs 4 lakh (previously Rs 3 lakh), allowing individuals with incomes between Rs 3-4 lakh to benefit from zero tax.

Tax Slabs for FY2025-26

Income Tax Slabs (Rs) Income Tax Rate (%)

From 0 to 4,00,000 0

From 4,00,001 to 8,00,000 5

From 8,00,001 to 12,00,000 10

From 12,00,001 to 16,00,000 15

From 16,00,001 to 20,00,000 20

From 20,00,001 to 24,00,000 25

From 24,00,001 and above 30

Income exempt from taxes: The finance minister declared that salary income up to Rs 12.75 lakh will no longer be subject to taxes under the new administration.  Under the previous regime, income between Rs 3 lakh and Rs 7 lakh was eligible for a tax refund of Rs 25,000.
 
For income up to Rs 12 lakh, the finance minister has proposed raising the rebate to Rs 60,000.  She has also suggested that incomes under Rs 4 lakh be tax-free, while those over Rs 4 lakh will be subject to different tax rates.
 
Rate Reduction: From the previous 30% tax rate, individuals in the Rs 20–24 lakh income band would now pay a reduced tax rate of 25%.

High-Income Slabs: The 30% tax rate for individuals making more than Rs 24 lakh stays the same.
 
 While maintaining the current structure for individuals with extremely high earnings, the revised tax slabs provide relief for middle-income taxpayers, especially those making between Rs 4 and Rs 24 lakh.
 
Who stands to gain?
 
With the implementation of standard deductions and the revision of the tax code, taxpayers earning less than Rs 12 lakh (or Rs 12.75 lakh for salaried individuals) will no longer be required to pay taxes.

Individuals earning between Rs 12 lakh and Rs 24 lakh (or Rs 24.75 lakh for salaried individuals) will experience a reduction of 25-31 percent in their tax liabilities.

For those with incomes exceeding Rs 24 lakh, the potential tax savings could amount to Rs 1.1 lakh under the newly proposed regime.

"The revised new tax regime presents a significant tax relief for a large segment of taxpayers. With zero tax liability for those earning below Rs 12 lakh and substantial tax savings of up to Rs 1.1 lakh for high earners, the proposed changes encourage individuals to opt for the simplified structure. If you fall within the affected income range, consider assessing your tax planning strategy to maximize savings under the new structure," Value Research stated in a note.
 
 
 
 
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SIBY JEYYA

15/03/2025 09:25 AM