As the new financial year begins on April 1, 2025, several significant changes to income tax rules will come into effect.
Announced in the Union Budget 2025 by Finance Minister Nirmala Sitharaman, these updates aim to simplify the tax structure, provide relief to taxpayers, and enhance compliance.
From revised tax slabs to increased thresholds for Tax Deducted at Source (TDS), these changes will impact salaried individuals, senior citizens, and professionals alike.
Here’s a detailed breakdown of the six key updates every salaried person should be aware of.
Revised Income Tax Slabs
The government has introduced new income tax slabs under the new tax regime for the financial year 2025-26. The revised slabs are as follows:
- Up to ₹4,00,000: NIL
- ₹4,00,001 to ₹8,00,000: 5%
- ₹8,00,001 to ₹12,00,000: 10%
- ₹12,00,001 to ₹16,00,000: 15%
- ₹16,00,001 to ₹20,00,000: 20%
- ₹20,00,001 to ₹24,00,000: 25%
- Above ₹24,00,000: 30%
These changes aim to provide relief to middle-income taxpayers and encourage individuals to opt for the new tax regime.
It’s important to note that the old tax regime remains unchanged, allowing taxpayers to choose the regime that best suits their financial situation.
Increased Rebate Under Section 87A, Higher TDS Exemption for Senior Citizens
To further benefit middle-class taxpayers, the rebate under Section 87A has been increased from ₹25,000 to ₹60,000.
This means individuals earning up to ₹12,00,000 under the new tax regime will have no tax liability.
This update is expected to significantly reduce the tax burden on salaried individuals.
Senior citizens will now enjoy a higher TDS exemption limit on interest income. The threshold has been raised from ₹50,000 to ₹1,00,000.
This change will reduce tax deductions on bank deposits and other savings schemes, providing financial relief to senior citizens.
Extended Deadline for Filing Updated ITR, Increased TDS Thresholds for Various Transactions
Taxpayers now have up to 48 months (four years) to file an updated Income Tax Return (ITR-U), compared to the previous 12-month limit.
This extension allows individuals more time to correct or update their returns without penalties, promoting better compliance.
The government has revised the TDS thresholds upward for dividends, lottery winnings, commissions, rent, and interest. For example:
- Dividend income threshold increased from ₹5,000 to ₹10,000.
- Rent threshold raised to ₹50,000 per month from the earlier annual limit of ₹2,40,000.
- Professional fees threshold increased from ₹30,000 to ₹50,000.
These changes aim to reduce the compliance burden on taxpayers and improve liquidity4.
Higher TCS Limit on Foreign Transactions
The government has increased the Tax Collected at Source (TCS) limit for foreign remittances from ₹7,00,000 to ₹10,00,000.
This update will impact individuals making international investments, travel payments, or educational expenses abroad.
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