As the financial year 2025-26 approaches, taxpayers in India are gearing up to navigate the revised income tax slabs introduced in the Union Budget 2025. The new tax structure aims to simplify the tax system and provide relief to individuals across various income brackets. In this blog, we will break down the key changes, benefits, and implications of the new income tax slabs.

What Are the New Income Tax Slabs?

The Union Finance Minister, Nirmala Sitharaman, announced significant changes to the income tax slabs during the presentation of the Union Budget 2025. The new tax slabs, effective from April 1, 2025, are as follows:

Key Highlights of the New Tax Regime:

1. Increased Basic Exemption Limit

One of the most notable changes is the increase in the basic exemption limit from Rs. 3 lakh to Rs. 4 lakh. This adjustment means that individuals earning up to Rs. 4 lakh will not be liable to pay any income tax, providing significant relief to lower-income earners.

2. Enhanced Tax Rebate Under Section 87A

The tax rebate under Section 87A has been raised to Rs. 60,000, ensuring that individuals with a net taxable income of up to Rs. 12 lakh pay no income tax. This marks a substantial increase from the previous rebate limit of Rs. 25,000, which applied to incomes up to Rs. 7 lakh.

3. Simplified Compliance

The new tax regime continues to be the default option for taxpayers, simplifying compliance. Individuals must actively opt for the old regime if they wish to claim deductions and exemptions available under it. This shift aims to encourage more taxpayers to transition to the new regime, which offers lower tax rates.

4. Marginal Relief for Higher Incomes

For individuals whose income slightly exceeds Rs. 12 lakh, the government has introduced a marginal relief provision. This ensures that the additional tax payable does not exceed the excess income over Rs. 12 lakh, preventing a sharp increase in tax liability.

Implications for Taxpayers

The revised income tax slabs are expected to significantly reduce the tax burden for many individuals. For instance, a taxpayer earning Rs. 12 lakh will now pay no tax, compared to the previous regime where they would have faced a substantial tax liability. Similarly, those earning Rs. 15 lakh will see a reduction in their tax payments, allowing for increased disposable income.

Conclusion

The new income tax slabs for FY 2025-26 represent a progressive step towards a more equitable tax system in India. By increasing the basic exemption limit and enhancing tax rebates, the government aims to provide relief to a broader section of taxpayers. As individuals prepare for the upcoming financial year, understanding these changes will be crucial for effective tax planning and compliance.

For more detailed information and personalized advice, consider consulting a tax professional or financial advisor. Stay informed and make the most of the new tax regime!

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New Income Tax Slabs for FY 2025-26: A Comprehensive Guide