Budget 2025: This benefit will be available in the new regime only
Tax calculation in the old regime will remain unchanged
Income up to ₹12.75 lakh is tax free, government will waive tax on all lower slabs;
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Budget 2025: The Budget 2025 has brought significant relief for taxpayers, especially for those opting for the new tax regime. Now, individuals earning up to ₹12 lakh per year will not have to pay any income tax. With the standard deduction of ₹75,000 for salaried employees, the total tax-free income threshold increases to ₹12.75 lakh.
The tax slabs under the new tax regime have been revised, but the old tax regime remains unchanged. The new exemption for income up to ₹12 lakh falls under Section 87A of the Income Tax Act, meaning the government will waive the 5% tax on income between ₹4-8 lakh and the 10% tax on income between ₹8-12 lakh. This provides a direct tax benefit of ₹60,000 to eligible taxpayers.
How Much Tax Will You Pay Now?
If your annual income exceeds ₹12 lakh, tax calculations will include:
- 5% tax on income between ₹4-8 lakh
- 10% tax on income between ₹8-12 lakh
- Higher slabs will be taxed as per the revised structure.
Additionally, the government plans to introduce a new Income Tax Bill next week to simplify taxation and improve transparency.
8 Major Income Tax Changes in Budget 2025
1. Increased TDS Exemption on Rental Income
The TDS exemption limit on rental income has doubled from ₹2.4 lakh to ₹6 lakh per year. Now, individuals earning up to ₹6 lakh annually from rent will not face TDS deductions.
2. Higher Tax Exemption on Senior Citizens’ Interest Income
The tax-free interest income limit for senior citizens on bank and post office deposits has been increased from ₹50,000 to ₹1 lakh.
3. Extended Time for Filing Past Tax Returns
The time limit for filing updated income tax returns has been extended from 2 years to 4 years, allowing taxpayers to rectify past filing mistakes or submit pending returns.
4. Tax Relief on Multiple Self-Occupied Homes
Previously, tax benefits were available only on one self-occupied property. Now, taxpayers can claim benefits for two self-occupied houses, reducing the tax burden on homeowners.
5. Upcoming New Income Tax Bill
A new Income Tax Bill will be introduced next week to simplify tax processes, reduce unnecessary notices, and streamline KYC procedures for banking and financial transactions.
6. Higher TDS for Non-PAN Holders
TDS and TCS deductions have been revised. Higher tax rates will now apply only to individuals without a PAN number, easing the burden on compliant taxpayers.
7. No TCS on Educational Remittances up to ₹10 Lakh
For students studying abroad, tax collected at source (TCS) on remittances up to ₹10 lakh will be waived if the funds are sourced from bank loans.
8. Tax-Free Withdrawals from Old National Savings Scheme (NSS)
Senior citizens withdrawing money from old NSS accounts after August 29, 2024, will not have to pay any tax on the withdrawal. This also applies to National Pension Scheme (NPS) Vatsalya accounts, but with certain limits.
Budget 2025: Understanding the Old Tax Regime
If you opt for the old tax regime, income up to ₹2.5 lakh remains tax-free. Additionally, Section 87A provides a zero-tax benefit for income up to ₹5 lakh.
Budget 2025: Key Differences Between Old and New Tax Regimes
1. What’s the Difference?
The new tax regime offers a higher tax-free limit (₹4 lakh) but does not allow deductions. The old regime provides multiple tax deductions but has a lower tax-free threshold.
2. What Tax Deductions Are Available in the Old Regime?
- Investments in EPF, PPF, and ELSS schemes reduce taxable income.
- Deductions for medical insurance premiums, home loan interest, and NPS contributions apply.
3. Who Should Choose the Old Regime?
If you invest heavily in tax-saving schemes, the old regime is better. If you prefer lower tax rates without deductions, the new regime is beneficial.
Budget 2025 has introduced significant changes that benefit middle-class taxpayers, senior citizens, and salaried employees. Understanding these changes can help you optimize your tax planning effectively.
