Many big announcements were made in Budget 2025 giving relief to the middle class, which included changes in tax slabs, TDS, tax rebate and other things. At the same time, a new Income Tax Bill was proposed in place of the old Income Tax Act 1961.
New Income Tax Rules: In Budget 2025, many big announcements were made to provide relief to the middle class, which included changes in tax slabs, TDS, tax rebate and other things. At the same time, a new Income Tax Bill was proposed in place of the old Income Tax Act 1961. All these changes are going to come into effect from April 1, 2025, for which only a few days are left now. This amendment by the government is to simplify the tax structure, increase consumption and give economic boost.
New tax slab
Under the new system, individuals earning up to Rs 12 lakh annually will be exempted from paying tax. Apart from this, salaried employees will be eligible for a standard deduction of Rs 75,000. This means that salary income up to Rs 12.75 lakh can now be exempt from tax. However, this exemption applies only to those who choose the new tax option. On the other hand, if it is more than this, tax will have to be paid as per the new tax slab. Which is as follows…
Upto ₹4 lakh – Nil
₹4 lakh – ₹8 lakh – 5%
₹8 lakh – ₹12 lakh – 10%
₹12 lakh – ₹16 lakh – 15%
₹16 lakh – ₹20 lakh – 20%
₹20 lakh – ₹24 lakh – 25%
More than ₹24 lakh – 30%
Tax rebate under section 87A
The biggest change is that the exemption under section 87A for taxpayers opting for the new tax regime has been increased from Rs 25,000 to Rs 60,000 earlier. This increase in tax rebate means that individuals earning up to Rs 12 lakh will have no tax liability under this regime, thereby increasing the limit of tax free income.
Tax Deduction at Source (TDS)
The Tax Deduction at Source (TDS) regulations have also been updated, with limits being raised across various categories to reduce unnecessary deductions and improve cash flow for taxpayers. For instance, the TDS limit on interest income for senior citizens has been doubled to Rs 1 lakh, thereby enhancing financial security for the elderly.
Similarly, the exemption limit on rental income has been raised to Rs 6 lakh per annum, thereby easing the burden for landlords and likely to boost the rental market in urban areas.
Updated Tax Returns
The Union Budget has increased the time limit for filing updated tax returns (ITR-U) from 12 months of the relevant assessment year to 48 months, giving taxpayers a more extended period to comply with tax obligations without incurring heavy penalties. The move is expected to ease the concerns of taxpayers regarding inadvertent delays in filing returns.
Furthermore, start-ups started before 1 April 2030 can avail 100% deduction on profits for three out of ten years, which is an attempt to encourage entrepreneurship and innovation within the Indian economy. Income Tax Bill, Finance Bill and other tax related regulations have been introduced, which are set to come into effect from 1 April 2025.
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