The Union Budget 2025 has introduced several key tax reforms aimed at providing relief to individuals and businesses. Finance Minister Nirmala Sitharaman, in her record eighth consecutive Budget presentation, announced major changes including higher tax exemptions, TDS relief, and incentives for startups. These reforms come at a crucial time when India’s economic growth is facing global uncertainties and inflationary pressures.
Let’s break down the key highlights of Budget 2025 and understand how they impact taxpayers, businesses, and the overall economy.
1. Income Tax Reforms: Higher Exemptions and Simplified Tax Slabs
One of the biggest announcements in Budget 2025 is the revision of income tax slabs, providing significant relief to the middle class.
New Income Tax Slabs for FY 2025-26 (New Regime)
Annual Income (₹)
Tax Rate (%)
Up to ₹12 lakh
0% (No Tax)
₹12,00,001 – ₹15,00,000
10%
₹15,00,001 – ₹20,00,000
15%
₹20,00,001 – ₹25,00,000
20%
Above ₹25 lakh
30%
Key Changes in Taxation:
✅ No income tax up to ₹12 lakh under the new tax regime, significantly increasing the tax-free threshold.
✅ Lower tax rates for incomes up to ₹25 lakh, making tax filing simpler and reducing the burden on middle-income earners.
✅ The old tax regime remains unchanged, allowing taxpayers to choose between the two.
2. TDS (Tax Deducted at Source) Relief for Individuals and Businesses
The government has announced TDS relief measures to reduce the compliance burden on businesses and individuals.
🔹 Higher TDS threshold for interest and salary payments, reducing tax deductions on small income transactions.
🔹 Simplified TDS rules for freelancers, gig workers, and MSMEs, ensuring ease of doing business.
🔹 TDS rationalization for senior citizens, reducing tax deductions on their pension and interest earnings.
Impact: With reduced TDS deductions, individuals and small businesses will experience improved cash flow and fewer compliance hassles.
3. Major Boost for Startups and MSMEs
Recognizing the importance of startups and small businesses in India’s economic growth, the Budget 2025 introduces several incentives:
✔️ Tax holiday for startups extended by 3 years, allowing more businesses to benefit from exemptions.
✔️ Reduction in compliance requirements, making it easier for startups to operate and raise funds.
✔️ Increase in credit guarantee schemes to support small and medium enterprises (MSMEs).
Impact: This move encourages entrepreneurship and innovation, making India a more attractive destination for startups.
4. GST and Indirect Tax Changes
The government has proposed several changes in GST laws to make compliance easier:
🔹 Lower GST rates on essential goods and services, benefiting common consumers.
🔹 Streamlined GST refund process, helping exporters and businesses improve cash flow.
🔹 Simplified tax filing process for small businesses, reducing the compliance burden.
Impact: These GST changes aim to promote ease of doing business and reduce tax-related complications.
5. Economic Outlook and Government’s Vision
📌 The Budget 2025 was presented amidst global economic uncertainties and trade challenges, including new tariff threats from the US.
📌 Infrastructure investment and job creation remain key priorities, with an increase in capital expenditure.
📌 Focus on digital economy, green energy, and Make in India, ensuring long-term growth.
Final Takeaway: The Budget 2025 focuses on taxpayer relief, business-friendly policies, and economic stability. With higher exemptions, TDS relief, and startup incentives, the government aims to boost disposable income, encourage entrepreneurship, and simplify tax compliance.
Conclusion: How Will Budget 2025 Impact You?
Salaried individuals earning up to ₹12 lakh will pay no income tax, increasing their savings.
Business owners and MSMEs will benefit from lower compliance requirements and credit support.
Startups get tax holidays and funding incentives, promoting innovation.
Investors and exporters will see better GST refund processes and policy stability.
With higher disposable income and simplified tax filing, Budget 2025 brings major financial relief to taxpayers and businesses.
What do you think of these tax reforms? Share your views in the comments!
Disclaimer: This article is for informational purposes only and should not be considered financial or tax advice. Please consult a professional before making any tax-related decisions.
The Union Budget 2025 has brought a major relief for taxpayers, particularly the middle-class segment. In a historic move, Finance Minister Nirmala Sitharaman announced that individuals earning up to ₹12 lakh annually will now pay zero income tax under the new tax regime. This announcement significantly increases the exemption threshold, providing more disposable income to taxpayers and simplifying the tax structure.
Additionally, the new tax slabs have been restructured to provide progressive tax benefits for incomes up to ₹25 lakh, while maintaining a 30% tax rate for higher income groups. Let’s take a detailed look at the revised income tax slabs for FY 2025-26 (AY 2026-27) and analyze their impact.
New Income Tax Slabs Under the Revised Tax Regime (FY 2025-26)
Annual Income (₹)
Tax Rate (%)
Up to ₹12 lakh
0% (No Tax)
₹12,00,001 – ₹15,00,000
10%
₹15,00,001 – ₹20,00,000
15%
₹20,00,001 – ₹25,00,000
20%
Above ₹25 lakh
30%
Key Change: The tax-free limit has been raised from ₹7 lakh to ₹12 lakh under the new regime, benefiting millions of salaried employees, professionals, and self-employed individuals.
In addition to the new slabs, a 4% health and education cess will be applicable on the total tax amount. Further, surcharges remain in place for high-income earners exceeding ₹50 lakh per year.
How Does This Benefit Taxpayers?
✅ 1. Higher Tax-Free Income Limit
Previously, individuals earning up to ₹7 lakh were exempt under the new tax regime (with rebate under Section 87A). This limit has now been raised to ₹12 lakh, ensuring more savings for salaried individuals and middle-class taxpayers.
✅ 2. Reduced Tax Liability for Middle-Income Groups
If you earn between ₹12 lakh and ₹25 lakh annually, you will pay significantly less tax than before.
Example: A person earning ₹15 lakh will now pay only 10% tax on ₹3 lakh (i.e., ₹30,000), compared to the previous tax liability of ₹60,000 under the old slabs.
✅ 3. More Disposable Income
With the tax burden reduced, individuals will have higher take-home salaries, leading to increased consumer spending, savings, and investment.
✅ 4. Simpler Tax Structure
The government aims to encourage taxpayers to switch to the new tax regime, as it eliminates the need for complex deductions and exemptions while offering lower tax rates.
Comparison: Old vs. New Tax Regime (FY 2025-26)
While the new tax regime offers lower tax rates and a higher exemption limit, the old tax regime still allows various deductions and exemptions. Let’s compare both options:
Section 80D: ₹25,000 deduction for health insurance (₹50,000 for senior citizens)
Section 80TTA: ₹10,000 deduction on savings account interest
Section 80CCD(1B): ₹50,000 additional deduction for NPS contributions
House Rent Allowance (HRA) & Leave Travel Allowance (LTA) exemptions
Important: The government has not changed the tax slabs under the old regime, so individuals must choose between the old and new regimes based on their financial situation.
Who Should Choose the New Tax Regime?
With the new tax regime becoming the default choice from April 1, 2023, taxpayers must actively opt for the old regime if they want to claim deductions. But should you make the switch?
✔ New Tax Regime is Better If:
You earn up to ₹12 lakh, as you pay zero tax.
You do not claim many deductions under the old regime.
You prefer simplified tax filing without exemptions.
❌ Stick to the Old Regime If:
You claim deductions above ₹2.5–3 lakh annually (e.g., investments, home loan, HRA).
You have high medical or insurance-related expenses.
📌 Example:
A taxpayer earning ₹15 lakh with no deductions under the new regime will pay ₹30,000 tax.
The same individual under the old regime (with ₹3 lakh deductions) will pay ₹60,000 tax.
Verdict: If deductions exceed ₹3 lakh, the old regime may be beneficial.
Surcharge Rates for High-Income Earners
While most taxpayers benefit from the new slabs, individuals earning above ₹50 lakh annually will continue to pay surcharges as follows:
Surcharge Rates Under the New Tax Regime
Income Range (₹)
Surcharge (%)
Up to ₹50 lakh
Nil
₹50 lakh – ₹1 crore
10%
₹1 crore – ₹2 crore
15%
Above ₹2 crore
25%
🔹 For the highest income group (₹5 crore+), the surcharge remains capped at 25%, down from 37% last year.
Government’s Vision Behind the Tax Changes
📌 1. Boosting Middle-Class Savings: By increasing the tax-free limit, the government aims to provide more liquidity to individuals.
📌 2. Encouraging Shift to the New Regime: The government is phasing out deductions under the old regime and making the new regime more attractive.
📌 3. Simplification of Tax Filing: By reducing the reliance on deductions, tax filing becomes easier for individuals and salaried employees.
📌 4. Economic Growth & Consumption Boost: With more disposable income, taxpayers are likely to spend more, invest more, and contribute to GDP growth.
Final Thoughts: What Should Taxpayers Do?
If your income is below ₹12 lakh, the new tax regime is clearly the best choice, as you pay zero tax.
If you earn above ₹12 lakh, compare the tax benefits between the two regimes before making a decision.
The government is making the new tax regime more attractive, so it may be wise to transition gradually.
What are your thoughts on the new tax slabs? Will you switch to the new regime or stick with the old one? Let us know in the comments!
Disclaimer: This article is for informational purposes only and does not constitute tax or financial advice. Please consult a tax professional before making financial decisions.
The Union Budget 2025 has introduced significant changes in India’s income tax structure, bringing relief to taxpayers across various income groups. One of the biggest highlights is the proposal to increase the tax exemption limit, ensuring that individuals earning up to ₹12 lakh annually may not have to pay any income tax under the new regime. Let’s take a detailed look at the latest income tax slab rates and what they mean for taxpayers.
New Income Tax Slabs for FY 2025-26
As per the new tax regime, the revised income tax slabs are as follows:
Annual Income (₹)
Tax Rate
Up to ₹12 lakh
0% (No Tax)
₹12 lakh – ₹15 lakh
10%
₹15 lakh – ₹20 lakh
15%
₹20 lakh – ₹25 lakh
20%
Above ₹25 lakh
30%
Key Highlights of the New Tax Regime
Tax exemption limit raised to ₹12 lakh: Individuals earning up to ₹12 lakh annually will not have to pay any income tax, bringing significant relief to middle-class taxpayers.
Reduced tax burden on higher income groups: The new tax slabs provide lower tax rates for those earning between ₹12 lakh and ₹25 lakh, making the new regime more attractive.
Encouraging taxpayers to shift to the new regime: With simpler slab rates and higher exemptions, the government aims to make the new tax regime the preferred choice over the old one.
How Does This Benefit Taxpayers?
Higher Savings for Salaried Individuals
The increase in the tax-free income threshold to ₹12 lakh means that salaried employees can retain a larger portion of their earnings without worrying about tax deductions.
Simplified Tax Filing
The new structure is designed to be more straightforward, making it easier for taxpayers to file returns without the need for complex deductions and exemptions.
Boost to Disposable Income
With lower tax rates across various income brackets, individuals will have more money in hand, which could lead to higher consumer spending and economic growth.
Old vs. New Tax Regime: Should You Switch?
With the revised tax slabs, many taxpayers may consider shifting to the new tax regime. However, the decision should be based on individual financial planning. The old regime allows deductions such as:
Section 80C: Up to ₹1.5 lakh for investments like PPF, EPF, and ELSS
Section 80D: Medical insurance premiums
HRA (House Rent Allowance) & LTA (Leave Travel Allowance)
Taxpayers who heavily rely on deductions may still find the old regime beneficial. However, those looking for simplicity and a higher tax-free limit may prefer the new regime.
Conclusion
The new income tax slabs for 2025-26 bring significant relief to taxpayers, especially those earning up to ₹12 lakh annually. With reduced tax rates for higher-income brackets, the government aims to make tax compliance easier while boosting disposable income. Taxpayers must analyze their financial situation carefully before choosing between the old and new tax regimes.
Are you planning to switch to the new tax regime? Share your thoughts in the comments below!
Disclaimer: This article is for informational purposes only and should not be considered tax advice. Please consult a financial expert for personalized tax planning.
A. Tax exemption Many taxpayers have received financial help from their employers and well-wishers for meeting their expenses incurred for treatment of COVID-19. In order to ensure that no income tax liability arises on this account, it has been decided to provide income-tax exemption to the amount received by a taxpayer for medical treatment from employer or from any person for treatment of COVID-19 during FY 2019-20 and subsequent years. Unfortunately, certain taxpayers have lost their life due to COVID-19. Employers and well-wishers of such taxpayers had extended financial assistance to their family members so that they could cope with the difficulties arisen due to the sudden loss of the earning member of their family. In order to provide relief to the family members of such taxpayer, it has been decided to provide income-tax exemption to ex-gratia payment received by family members of a person from the employer of such person or from other person on the death of the person on account of COVID-19 during FY 2019-20 and subsequent years. The exemption shall be allowed without any limit for the amount received from the employer and the exemption shall be limited to Rs. 10 lakh in aggregate for the amount received from any other persons. Necessary legislative amendments for the above decisions shall be proposed in due course of time.
B. Extension of Timelines In view of the impact of the Covid-19 pandemic, taxpayers are facing inconvenience in meeting certain tax compliances and also in filing response to various notices. In order to ease the compliance burden of taxpayers during this difficult time, reliefs are being provided through Notifications nos. 74/2021 & 75/2021 dated 25th June, 2021 Circular no. 12/2021 dated 25th June, 2021. These reliefs are
Objections to Dispute Resolution Panel (DRP) and Assessing Officer under section 144C of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for which the last date of filing under that section is 1st June, 2021 or thereafter, may be filed within the time provided in that section or by 31st August, 2021, whichever is later.
The Statement of Deduction of Tax for the last quarter of the Financial Year 2020-21, required to be furnished on or before 31st May, 2021 under Rule 31A of the Income-tax Rules,1962 (hereinafter referred to as “the Rules”), as extended to 30th June, 2021 vide Circular No.9 of 2021, may be furnished on or before 15th July, 2021.
The Certificate of Tax Deducted at Source in Form No.16, required to be furnished to the employee by 15th June, 2021 under Rule 31 of the Rules, as extended to 15th July, 2021 vide Circular No.9 of 2021, may be furnished on or before 31st July, 2021.
The Statement of Income paid or credited by an investment fund to its unit holder in Form No. 64D for the Previous Year 2020-21, required to be furnished on or before 15th June, 2021 under Rule 12CB of the Rules, as extended to 30th June, 2021 vide Circular No.9 of 2021, may be furnished on or before 15th July, 2021.
The Statement of Income paid or credited by an investment fund to its unit holder in Form No. 64C for the Previous Year 2020-21, required to be furnished on or before 30th June, 2021 under Rule 12CB of the Rules, as extended to 15th July, 2021 vide Circular No.9 of 2021, may be furnished on or before 31st July, 2021.
The application under Section 10(23C), 12AB, 35(1)(ii)/(iia)/(iii) and 80G of the Act in Form No.10A/ Form No.10AB, for registration/ provisional registration/ intimation/ approval/ provisional approval of Trusts/ Institutions/ Research Associations etc., required to be made on or before 30th June, 2021, may be made on or before 31st August, 2021.
The compliances to be made by the taxpayers such as investment, deposit, payment, acquisition, purchase, construction or such other action, by whatever name called, for the purpose of claiming any exemption under the provisions contained in Section 54 to 54GB of the Act, for which the last date of such compliance falls between 1st April, 2021 to 29th September, 2021 (both days inclusive), may be completed on or before 30th September, 2021.
The Quarterly Statement in Form No. 15CC to be furnished by authorized dealer in respect of remittances made for the quarter ending on 30th June, 2021, required to be furnished on or before 15th July, 2021 under Rule 37 BB of the Rules, may be furnished on or before 31st July, 2021.
The Equalization Levy Statement in Form No. 1 for the Financial Year 2020-21, which is required to be filed on or before 30th June, 2021, may be furnished on or before 31st July, 2021.
The Annual Statement required to be furnished under sub-section (5) of section 9A of the Act by the eligible investment fund in Form No. 3CEK for the Financial Year 2020-21, which is required to be filed on or before 29th June, 2021, may be furnished on or before 31st July, 2021.
Uploading of the declarations received from recipients in Form No. 15G/15H during the quarter ending 30th June, 2021, which is required to be uploaded on or before 15th July, 2021, may be uploaded by 31st August,2021.
Exercising of option to withdraw pending application (filed before the erstwhile Income Tax Settlement Commission) under sub-section (1) of Section 245M of the Act in Form No. 34BB, which is required to be exercised on or before 27th June, 2021, may be exercised on or before 31st July, 2021.
Last date of linkage of Aadhaar with PAN under section 139AA of the Act, which was earlier extended to 30th June, 2021 is further extended to 30th September, 2021.
Last date of payment of amount under Vivad se Vishwas(without additional amount) which was earlier extended to 30th June, 2021 is further extended to 31st August, 2021.
Last date of payment of amount under Vivad se Vishwas (with additional amount) has been notified as 31st October, 2021.
Time Limit for passing assessment order which was earlier extended to 30th June, 2021 is further extended to 30th September, 2021.
Time Limit for passing penalty order which was earlier extended to 30th June, 2021 is further extended to 30th September, 2021.
Time Limit for processing Equalisation Levy returns which was earlier extended to 30th June, 2021 is further extended to 30th September, 2021.
CBDT grants relaxation in electronic filing of forms 15CA & 15CB in view of difficulties reported by taxpayers in filing of forms online on the new e-filing portal http://incometax.gov.in. The forms can be submitted in manual format to the authorised dealers till 30th June, 2021.
