The Finance Minister also announced a change in TDS, ULIP taxation, NPS rules and self-conscious house tax relief.
The new rule applies to the evaluation of the year 2025-26.
New income tax slab
Slabs are revised under the new tax regime:
- No tax on income up to ₹ 4 lakh
- 5% tax on income from ₹ 4 lakh to ₹ 8 lakh
- 10% tax on income from ₹ 8 lakh to ₹ 12 lakh
- 15% tax on income from ₹ 12 lakh to ₹ 16 lakh
- 20% tax on income ₹ 16 lakh to ₹ 20 lakh
- 25% tax on income from ₹ 20 lakh to ₹ 24 lakh
- 30% tax on income above ₹ 24 lakh
Income of up to ₹ 12 lakh is tax-free
A taxpayer who earns ₹ 12 lakh will have a tax liability of ₹ 60,000. However, discounts and deductions completely waive this tax.
With ₹ 75,000 standard deduction, salaried persons can effectively pay zero tax up to ₹ 12.75 lakh.
Tax relief at another self-conscious house
Earlier, only one self-conscious house was considered tax-free, while the other house was taxed on the basis of its rental value.
From April 1, 2025, both self-conscious assets will be tax-free.
It removes taxes on rental income, benefiting home owners with several properties.
High interest deduction for senior citizens
The tax deduction limit on interest income for senior citizens has doubled from ₹ 50,000 to ₹ 1 lakh. This will reduce tax burden and encourage savings among retired people.
TDS and TCS simplification
To simplify tax compliance, the government has:
- TDS threshold increased from ₹ 2.40 lakh to ₹ 6 lakh per year on rent.
- The TCS exemption limit on the liberal remittance scheme (LRS) transactions increased from ₹ 7 lakh to ₹ 10 lakh.
- TCS was removed when the fund comes from an education loan on education related recommendations.
- TCS ended the sale of goods, reduced compliance problems.
Tax exemption on old NSS withdrawal
From August 29, 2024, senior citizens with the Old National Savings Scheme (NSS) accounts will not be taxed. It benefits people whose accounts no longer earned interest.
NPS Vatsalya accounts equal tax treatment
Budget 2025 NPS expands the same tax benefits available for regular NPS accounts for Vatsalya accounts, which is subject to overall contributions. This ensures tax fairness in various NPS schemes.
Ulip taxation change
ULIPs with an annual premium above ₹ 2.5 lakh will be taxed as capital benefits instead of income.
12.5%tax will be levied on long -term capital gains (holding period in one year).
Earlier, ULIP was taxed as income from other sources, with a rate of up to 30%.
This step aligns taxation with equity mutual funds and removes previous uncertainties.
Extended time to file update ITR
Taxpayers will now get four years (instead of two) to register an updated income tax return (ITR). It offers more time to individuals to fix errors and disclose the missed income.
first published: February 2, 2025 9:46 AM First
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