As of April 1, 2025, several significant changes to India’s income tax rules have come into effect for the financial year 2025–26 (assessment year 2026–27), particularly under the New Tax Regime. Here’s an overview of the key updates:
New Income Tax Slabs (FY 2025–26)
The Union Budget 2025 proposed revised tax slabs under Section 115BAC, which now forms the default tax regime. This update is aimed at ensuring that individuals retain more of their income, boosting savings and consumption.
These revised slab rates will apply to income earned from 1st April 2025 onwards (i.e., for AY 2026–27).
Here’s how the new tax slabs look:
| Annual Income (₹) | 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% |
Note: These slabs apply by default. If you wish to continue with the old tax regime, you’ll need to opt-in every year before filing your ITR
What Does This Mean for You?
- If your income is ₹12 lakh or less, you may end up paying zero tax, thanks to the increased Section 87A rebate and standard deduction.
- These rates are particularly attractive for individuals with limited deductions or exemptions, like freelancers, startups, or salaried individuals with no home loan or investments under 80C.
Section 87A Rebate Increased — Huge Relief!
Earlier, the rebate under Section 87A was ₹25,000, applicable up to ₹7 lakh income. From this year, it’s been increased to ₹60,000, which means:
🟢 Taxpayers with income up to ₹12 lakh will have zero tax liability under the New Regime (thanks to this rebate + standard deduction).
👨💼 Standard Deduction Raised for Salaried Employees
Another welcome move—standard deduction for salaried individuals is now ₹75,000, up from ₹50,000. This means your taxable income reduces further before tax is applied.
Revised TDS & TCS Thresholds
TDS and TCS rules have been relaxed to reduce compliance burden:
- Higher threshold limits for TDS on interest and contractual payments.
- Certain categories of TCS (like foreign remittances) have been removed altogether.
This benefits small businesses and individual taxpayers alike.
Revised TDS Threshold Limits (Effective from FY 2025–26)
| Section | Nature of Payment | Before 1st April 2025 | From 1st April 2025 |
|---|---|---|---|
| 193 | Interest on securities | NIL | ₹10,000 |
| 194A | Interest (excluding securities) | ₹50,000 (senior citizens) ₹40,000 (others – bank, PO) ₹5,000 (others) | ₹1,00,000 (senior citizens) ₹50,000 (others – bank, PO) ₹10,000 (others) |
| 194 | Dividend (individual shareholder) | ₹5,000 | ₹10,000 |
| 194K | Mutual fund unit income | ₹5,000 | ₹10,000 |
| 194B / 194BB | Lottery / Crossword / Horse race winnings | Aggregate > ₹10,000 (FY) | ₹10,000 per transaction |
| 194D | Insurance commission | ₹15,000 | ₹20,000 |
| 194G | Lottery ticket income / commission | ₹15,000 | ₹20,000 |
| 194H | Commission / Brokerage | ₹15,000 | ₹20,000 |
| 194-I | Rent | ₹2,40,000 (per FY) | ₹50,000 per month |
| 194J | Professional/Technical fees | ₹30,000 | ₹50,000 |
| 194LA | Compensation on compulsory acquisition | ₹2,50,000 | ₹5,00,000 |
| 194T | Partner’s remuneration, interest, commission | NIL | ₹20,000 |
💡 Note: All other TDS sections remain unchanged.
Changes to Tax Collected at Source (TCS)
Revised TCS Provisions (Effective April 1, 2025)
| Section | Nature of Transaction | Before 1st April 2025 | From 1st April 2025 |
|---|---|---|---|
| 206C(1G) | Foreign remittance under Liberalized Remittance Scheme (LRS) & Overseas Tour Packages | Above ₹7 lakhs – TCS applicable | Now applicable only if remittance exceeds ₹10 lakhs |
| 206C(1G) | Foreign education remittance funded via educational loan from financial institution | Above ₹7 lakhs – TCS @ 0.5% | No TCS at all |
| 206C(1H) | TCS on sale of goods (if value exceeded ₹50 lakhs/year) | TCS @ 0.1% beyond ₹50 lakhs | Provision removed (No TCS applicable) |
What It Means for You
- Parents & Students sending money abroad for studies (via loans) — No more TCS deductions.
- Travelers & Investors can remit up to ₹10 lakhs overseas without any TCS worries.
- Businesses selling goods valued over ₹50 lakhs annually will no longer have to deduct and deposit TCS—cutting down compliance efforts
Real Estate Relief: Two Self-Occupied Properties Now Tax-Free
Previously, tax exemption was allowed only on one self-occupied house property. Now, you can claim exemption on two, which is especially helpful for those investing in housing across cities.
📊 New Regime vs. Old Regime — Still a Dilemma?
| Feature | Old Regime | New Regime |
|---|---|---|
| Deductions (80C, 80D, HRA, etc.) | ✅ Allowed | ❌ Not allowed |
| Standard Deduction | ₹50,000 | ₹75,000 |
| Section 87A Rebate | ₹12,500 (up to ₹5L income) | ₹60,000 (up to ₹12L income) |
| Tax Slabs | Higher | Lower (New Slabs) |
⚖️ If you don’t have many deductions to claim, the New Regime is likely more beneficial. But for deduction-heavy taxpayers (like home loan + 80C + insurance), the Old Regime might still win.
🎯 Final Thoughts
These changes are a step toward simplification, with incentives for choosing the New Tax Regime. As always, choosing between the old and new regime depends on your income structure, deductions, and financial goals.
📞 Need Help with Tax Planning?
At Sunil Agarwal & Associates, we offer personalized tax planning for individuals, startups, and businesses. Whether you’re confused between regimes or need help filing, we’re here to assist.
👉 Visit us at casagarwal.com
📧 Email: taxsagarwal@gmail.com
