The Union Budget 2025, presented on February 1, 2025, has introduced significant amendments to the tax structure, particularly concerning the new tax regime. These changes, effective from the financial year 2025-26 and onwards, are designed to provide relief to taxpayers by adjusting income tax slabs and offering a higher rebate. Hereʼs everything you need to know about these crucial updates:
Revised Tax slabs and rates
The new tax regime has brought about a streamlined tax structure with revised tax slabs. Below is a breakdown of the updated tax slabs and the corresponding tax rates:
| Total Taxable Income | Tax Rate |
|---|---|
| Up to ₹4,00,000 | NIL |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
A key revision in this budget is the reintroduction of the 25% tax slab for individuals earning between ₹20,00,001 and ₹24,00,000. The highest tax rate of 30% is now applicable to those with total taxable income above ₹24,00,000, compared to the previous threshold of ₹15,00,000.
Increased Rebate Under Section 87A
One notable move, the rebate under Section 87A has been enhanced to ₹60,000 for individuals with total taxable income up to ₹12,00,000. This change marks a shift from the previous rebate of ₹20,000, which was available for those with taxable income up to ₹7,00,000.
Marginal rebate for Income between ₹12,00,000 and ₹12,70,588
To further reduce the tax burden, the marginal rebate has also been amended for individuals with total taxable income between ₹12,00,000 and ₹12,70,588. For these individuals, the income in excess of ₹12,00,000, but not exceeding ₹12,70,588, shall be the net tax due, plus a cess of 4%, rather than the earlier limits of ₹7,00,000 and ₹7,22,222, as per the previous amendment.
Letʼs break this down with an example:
If the total taxable income is ₹12,15,000, it exceeds ₹12,00,000 by ₹15,000. In this case, the tax due would be ₹15,000 (calculated as the difference between ₹12,00,000 and ₹12,15,000), and the cess at 4% would be added to this, resulting in a total tax liability of ₹15,600 for the financial year.This process continues for income up to ₹12,70,588, where the excess income will be taxed at the net tax due plus a 4% cess, after which regular tax calculations shall apply.
Standard Deduction
It is important to note that the standard deduction remains unchanged and continues to be Rs. 75,000/-, helping to reduce the taxable income of salaried individuals.
The amendments introduced in the Union Budget 2025 aim to make the tax regime more equitable and provide significant relief to taxpayers, especially those in the middle-income brackets.
Stay updated and plan your taxes!
Summary of amendments
- Revision of tax slab under new regime including re-introduction of 25% slab and highest tax rate of 30% for incomes above ₹24,00,000/- (previously, ₹15,00,000/-)
- Rebate u/ 87A has been increased to ₹60,000/- for total taxable incomes below ₹12,00,000/-
- For incomes between ₹12,00,000 and ₹12,70,588, the net tax due shall
- be equal to the taxable income in excess of ₹12,00,000/- plus cess of 4%.
- However, at ₹12,70,588/-, the marginal rebate shall be NIL and the regular tax calculations shall apply.
- Surcharge and standard deduction, in the new regime, remain unchanged
| Total Taxable Income | Tax Rate |
|---|---|
| Up to ₹4,00,000 | NIL |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
