From April 1, 2025 (FY 2025-26), significant income tax changes have come into effect in India. The government has introduced revised tax slabs, a higher standard deduction, an enhanced rebate under Section 87A, changes in TDS thresholds, and fresh clarifications on deductions. Whether you’re a salaried person or running a business, these updates will directly impact how much tax you pay and how you plan your finances.
Key Changes in FY 2025-26
1. Revised Tax Slabs in the New Regime
- The basic exemption limit has been raised: under the new tax regime, income up to ₹4,00,000 is now tax-free.
- Revised slabs under the new regime are:
| Taxable Income (New Regime) | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
2. Standard Deduction Increased
- Standard deduction for salaried individuals has been increased to ₹75,000.
- This reduces taxable income, giving relief to the middle-income group and boosting take-home salary.
3. Enhanced Rebate under Section 87A
- The rebate under Section 87A has been expanded.
- Now, individuals with taxable income up to ₹12,00,000 under the new regime can claim a rebate and pay zero tax.
- Combined with the standard deduction, this benefits a wide base of middle-class taxpayers.
4. TDS & Threshold Changes
- Enhanced thresholds for Tax Deducted at Source (TDS) have been introduced, reducing compliance burden on small taxpayers.
- New clarifications include simplified rules for nil TDS certificates and smoother deduction processes for salary, house property income, and pensions.
5. Clarifications on Deductions
- Rules on deductions for house property income, including pre-construction interest, have been simplified.
- Commuted pension deductions have been extended, even for non-employee categories.
- The new law also streamlines tax sections, reducing the complexity of compliance for individuals and businesses.
Who Benefits and What to Watch
| Category | Benefit | Things to Watch |
|---|---|---|
| Salaried employees (₹4–12 lakh) | Large relief under new regime; higher deduction and rebate | Old regime may still be better if using multiple deductions (HRA, home loan, etc.). |
| Senior citizens | Higher exemption and deductions clarity | Must compare old vs new regime carefully. |
| Businesses/self-employed | Reduced TDS compliance and simplified sections | Need proper accounting and planning before choosing regime. |
Old vs New Tax Regime: Which One Should You Choose?
- New Regime: Offers simpler tax structure with higher exemption and rebates, but fewer deductions.
- Old Regime: Still beneficial for those claiming major deductions like home loan interest, HRA, 80C investments, and medical insurance.
- Smart Tip: Calculate your tax liability under both regimes before filing and pick whichever reduces your overall outgo.
The FY 2025-26 income tax changes mark a big shift towards simplification and taxpayer relief. With a higher basic exemption limit, a bigger standard deduction, and a broader rebate under Section 87A, millions of taxpayers—especially the salaried middle class—stand to gain. For business owners, reduced TDS burdens and simplified sections also make compliance easier.
Taxpayers should carefully evaluate whether the new regime or the old regime benefits them more. Early planning will ensure maximum savings under the new rules.
FAQs
Q1: What is the new basic exemption limit in FY 2025-26?
Income up to ₹4,00,000 is tax-free under the new regime.
Q2: How much standard deduction is available now?
The standard deduction for salaried and pensioner individuals has been raised to ₹75,000.
Q3: Who benefits from the Section 87A rebate?
Individuals with taxable income up to ₹12,00,000 under the new regime can claim the rebate and pay zero tax.
Q4: Are there changes in deductions for house property or pre-construction interest?
Yes. The new law clarifies eligibility for house property deductions, including pre-construction interest on let-out properties.
Q5: When will the new Income Tax Act replace the old one?
The Income-Tax Act 2025 has been passed to replace the 1961 Act, with changes effective from April 1, 2025, and more simplifications from April 2026.