New Delhi: In the Union Budget 2025, Finance Minister Nirmala Sitharaman announced significant changes to the income tax structure, aiming to provide relief to the middle class and boost economic growth. These new rules will come into effect from 1st April 2025, marking the start of the new financial year. The government has revised the tax slabs, increased tax rebates, and made several changes to improve cash flow for taxpayers.
Revised Tax Slabs for the New Tax Regime
Under the new tax regime, the government has introduced a significant change for those earning up to Rs 12 lakh annually. These taxpayers will no longer have to pay any tax. The new tax slabs are as follows:
– Up to Rs 4 lakh: No tax
– Rs 4 lakh to Rs 8 lakh: 5% tax
– Rs 8 lakh to Rs 12 lakh: 10% tax
– Rs 12 lakh to Rs 16 lakh: 15% tax
– Rs 16 lakh to Rs 20 lakh: 20% tax
– Rs 20 lakh to Rs 24 lakh: 25% tax
– Above Rs 24 lakh: 30% tax
Additionally, salaried individuals will receive a standard deduction of Rs 75,000, further reducing their taxable income. These changes will only apply to those following the new tax regime.
Tax Rebate under Section 87A
A major relief for taxpayers under the new regime is the increase in the tax rebate limit under Section 87A. The rebate amount has been increased from Rs 25,000 to Rs 60,000. This means that individuals earning up to Rs 12 lakh annually will now pay zero tax, thanks to the enhanced rebate, raising the tax-free income limit.
Changes in TDS and Rent Income
To ease the financial burden on taxpayers, changes have been made to the Tax Deducted at Source (TDS) system. The TDS limit for senior citizens has been doubled to Rs 1 lakh. Additionally, the tax rebate for rental income has been increased to Rs 6 lakh, providing relief to house owners, especially in urban areas where rent income tends to rise.
Updated Tax Return (ITR-U) Filing Time Extended
The government has also extended the deadline for filing updated tax returns (ITR-U) from 12 months to 48 months. This extension will allow taxpayers more time to file any missed returns without facing heavy penalties.
Support for Startups
To encourage innovation and entrepreneurship, startups that begin operations before 1st April 2030 will receive a 100% tax rebate for the first 3 years within a 10-year period.
The new tax laws, including updated tax slabs, rebates, and relaxed filing deadlines, aim to make the tax system simpler and more beneficial for taxpayers, especially those in the middle class. These changes are set to take effect in the 2025-26 financial year.
