In the latest budget announcement for the fiscal year 2025, there have been significant adjustments to the income tax slabs, offering some respite for middle-class taxpayers. Finance Minister Nirmala Sitharaman unveiled a new tax regime that exempts individuals earning up to Rs 12 lakh annually from paying any income tax. This increase in the exemption limit and adjustments to tax slabs aim to ease the burden on middle-class earners.
Relief for Salaried Employees
For salaried employees, the tax-free threshold has been raised to Rs 12.75 lakh per year, considering a standard deduction of Rs 75,000. These changes are part of the efforts to simplify the tax system and provide more leeway for taxpayers. Various exemptions and adjustments have been incorporated into the new income tax regime to benefit middle-class individuals.
However, it is essential to note that the revised tax slabs and rates announced in the Budget 2025-26 will only apply to the Financial Year (FY) 2025-26, corresponding to the Assessment Year (AY) 2026-27. Taxpayers must understand that these modifications will not impact the FY 2024-25.
The new tax slabs are applicable to income earned between April 1, 2025, and March 31, 2026. Income tax returns for this period will be filed in AY 2026-27. Therefore, for tax filing in 2025, the rates announced in Budget 2024-25 will remain in effect.
Tax Filing Insights
The tax rates outlined in Budget 2024-25 will continue to be in effect for the 2025 tax filing season. Some key points of the new tax rules for the fiscal year 2024-25 include:
– Default tax regime: The default tax regime is in place, requiring individuals who wish to opt for the old regime to submit Form 10-IEA.
– Basic exemption limit: The basic exemption limit is set at Rs. 3 lakhs for all individuals, irrespective of age.
– Rebate u/s 87A: Individual taxpayers can claim a rebate under section 87A if their income does not exceed Rs. 7 lakhs, resulting in zero tax liability for incomes below Rs. 7 lakhs.
– Surcharge: The maximum surcharge rate in the new regime is 25%, down from 37% in the old regime.
– Tax rebate of up to Rs. 25,000 is available for total income not exceeding Rs. 7,00,000 (excluding NRIs).
– To file ITR under the old regime, taxpayers must submit Form 10-IEA.
In the new tax regime for FY 2024-25, the tax slabs for various income brackets have been adjusted to provide more clarity and fairness in the tax system. The changes made in the new tax regime in Budget 2024 include:
– Enhancement of the standard deduction limit to Rs 75,000 from Rs 50,000, resulting in a Rs 25,000 increase.
– Increase in the standard deduction limit for family pensioners to Rs 25,000 from Rs 15,000, a Rs 10,000 rise.
– Expansion of the deduction on the employer’s contribution to the National Pension System account to 14% from 10%, offering employees a chance to maximize tax savings under the new tax system.
These changes aim to simplify the tax structure, provide relief to middle-class taxpayers, and enhance compliance and transparency in the income tax filing process. As the new tax regime comes into effect, taxpayers must stay informed and follow the guidelines to ensure a smooth filing process and maximize their tax benefits.
