The Union Budget 2025 has introduced several changes to the income tax system in India, aiming to simplify taxation, provide relief to taxpayers, and promote economic growth. This article covers the latest updates in the income tax slabs, exemptions, and other key proposals.
New vs. Old Tax Regime (FY 2025-26)
The government continues to offer two tax regimes: the New Tax Regime (which has lower tax rates but fewer deductions) and the Old Tax Regime (which allows multiple exemptions and deductions).
Income Tax Slabs for FY 2025-26
New Tax Regime (Default Option)
- Income up to ₹3,00,000: Nil
- ₹3,00,001 to ₹6,00,000: 5%
- ₹6,00,001 to ₹9,00,000: 10%
- ₹9,00,001 to ₹12,00,000: 15%
- ₹12,00,001 to ₹15,00,000: 20%
- Above ₹15,00,000: 30%
Rebate under Section 87A: No tax payable if income is up to ₹7,00,000.
Old Tax Regime (With Deductions & Exemptions)
- Income up to ₹2,50,000: Nil
- ₹2,50,001 to ₹5,00,000: 5%
- ₹5,00,001 to ₹10,00,000: 20%
- Above ₹10,00,000: 30%
Rebate under Section 87A: No tax payable if income is up to ₹5,00,000.
Key Announcements in Budget 2025
1. Increase in Standard Deduction
- The standard deduction for salaried individuals and pensioners has been increased to ₹60,000 from ₹50,000 under both regimes.
2. Higher Tax-Free Gratuity Limit
- The tax-free gratuity limit has been increased from ₹20 lakh to ₹25 lakh.
3. Changes in Capital Gains Tax
- Indexation benefits will now apply to debt mutual funds held for at least 2 years instead of 3 years.
- Long-term capital gains (LTCG) on equity remains at 10% on gains above ₹1 lakh.
4. Tax Benefits on Home Loans
- A special deduction of ₹2.5 lakh on home loan interest for first-time buyers of affordable housing.
5. Incentives for Startups & MSMEs
- The tax holiday for eligible startups has been extended by one more year.
- MSMEs with an annual turnover of up to ₹3 crore will get concessional tax rates.
6. Senior Citizens & Pensioners Benefits
- Senior citizens above 75 years are exempted from filing ITR if their income is only from pension and interest.
- The deposit limit for Senior Citizens’ Savings Scheme (SCSS) has been raised to ₹50 lakh.
7. TDS & Compliance Changes
- The threshold for TDS on online gaming winnings has been reduced to ₹5,000.
- Faster processing of ITR refunds within 7 days.
Which Tax Regime Should You Choose?
| Category | Old Tax Regime (With Deductions) | New Tax Regime (Lower Tax Rates) |
|---|---|---|
| Salaried Employee | If you claim HRA, 80C, 80D, home loan benefits | If you don’t have major deductions |
| Business Owner | If you claim business expenses, investments | If you prefer simplified tax filing |
| Senior Citizen | If you claim higher 80TTB (interest income exemption) | If income is pension-based with fewer deductions |
Final Thoughts
The Income Tax Budget 2025 provides some relief to taxpayers while encouraging digital compliance and investments in key sectors. Taxpayers should evaluate their financial situation and choose the most beneficial tax regime accordingly.
Disclaimer: The above information is based on the latest budget announcements and may be subject to changes. Please consult a tax professional for personalized tax planning.