The Income Tax Changes 2025 introduced in the Union Budget aim to simplify compliance, boost disposable income, and align India’s tax framework with evolving economic needs. With revised slabs, higher exemptions, and digital reforms, these updates significantly impact individual taxpayers. Let’s break down the key reforms.
Higher Tax Rebate Threshold for Middle-Income Earners
The tax rebate limit under Section 87A has surged from ₹7 lakh to ₹12 lakh for individuals opting for the new tax regime12. This means taxpayers earning up to ₹12 lakh annually will pay zero income tax, saving ₹80,000 compared to previous rules1. However, filing returns remains mandatory for compliance.
A marginal relief provision ensures taxpayers slightly above ₹12 lakh don’t face steep tax jumps. For instance, an income of ₹12.10 lakh incurs only ₹10,000 in tax, preserving take-home pay1. This adjustment benefits salaried professionals and gig workers alike.
Revised Tax Slabs Simplify Calculations
The new tax regime now features seven slabs, up from six, with rates ranging from 5% to 30%2. The no-tax threshold has risen to ₹4 lakh (from ₹3 lakh), while the highest rate applies to incomes above ₹24 lakh1. Here’s the updated structure:
| Income Slab (₹) | Tax Rate (%) |
|---|---|
| 0–4,00,000 | 0 |
| 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 |
These changes simplify tax planning, especially for middle-income groups1. For strategies on maximizing savings under the new slabs, see our guide on tax-efficient investment options.
Abolition of Equalisation Levy Boosts Digital Economy
The 2–6% equalisation levy on digital transactions, introduced in 2020, has been scrapped19. This removes compliance burdens for foreign e-commerce firms and could attract global players like Netflix or Google to expand operations in India1. The move aligns with India’s goal to streamline digital taxation and foster innovation.
Enhanced Standard Deduction and Compliance Measures
Salaried individuals now enjoy a higher standard deduction of ₹75,000 (up from ₹50,000), raising the non-taxable income limit to ₹12.75 lakh1. Additionally, stricter compliance rules include:
- Mandatory PAN-Aadhaar linking to receive dividends.
- UPI deactivation for mobile numbers unused over a years.
These measures aim to curb tax evasion while easing processes for honest taxpayers.
Data Spotlight:
- Over 68% of individual taxpayers fall under the ₹5–15 lakh bracket, making the ₹12 lakh rebate a widespread relief1.
- The ₹75,000 standard deduction could save taxpayers ₹7,500 annually1.
For detailed budget analysis, refer to the Economic Times report.
Explore more insights on personal finance and tax planning to stay ahead in 2025!