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Budget 2025: Income Tax Slabs Have Been Revised, Here Are the Details

One of the biggest highlights is zero tax on annual income up to ₹12 lakh under the new tax regime.

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Budget 2025: Income Tax Slabs Have Been Revised, Here Are the Details


The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, introduced significant changes in income tax slabs, primarily under the new tax regime. These changes provide much-needed relief to salaried individuals, particularly the middle class. One of the biggest highlights is zero tax on annual income up to ₹12 lakh under the new tax regime, owing to a hike in the Section 87A rebate limit.

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Key Highlights of Income Tax Changes in Budget 2025-26:

  1. No Income Tax for Salaried Individuals Earning Up to ₹12 Lakh in New Regime
  2. Basic Exemption Limit Increased from ₹3 Lakh to ₹4 Lakh
  3. Section 87A Rebate Limit Increased from ₹25,000 to ₹60,000
  4. New Income Tax Slabs Introduced Under the New Tax Regime
  5.  Old Tax Regime Remains Unchanged

Let’s break down the new tax slabs and compare them with the old tax regime

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New Income Tax Slabs for FY 2025-26 (AY 2026-27)

Under the new tax regime, the government has introduced revised slabs to simplify taxation and provide tax relief to middle-income earners.

Income Tax Slabs Under New Regime (Post-Budget 2025-26)

Annual Income (₹) Tax Rate (%)
Up to ₹4,00,000 No Tax
₹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%

How Does Income of ₹12 Lakh Become Tax-Free?

The increase in the Section 87A rebate limit plays a key role in making incomes up to ₹12 lakh tax-free.

– Previously, the 87A rebate was available for incomes up to ₹7 lakh, with a rebate of ₹25,000.
– Now, this rebate has been extended to incomes up to ₹12 lakh, with a maximum rebate of ₹60,000.
– This means that taxpayers earning up to ₹12 lakh will not have to pay any tax.

Income Tax Slabs Under Old Tax Regime (Unchanged in Budget 2025-26)

Income Tax Slabs for FY 2025-26 (Old Regime)

Annual Income (₹) Tax Rate (%)
Up to ₹2,50,000 No Tax
₹2,50,001 – ₹5,00,000 5%
₹5,00,001 – ₹10,00,000 20%
Above ₹10,00,000 30%

Standard Deduction (Unchanged):
₹50,000 under the old tax regime.
₹75,000 under new tax regime.

Comparison: New Tax Regime (Post-Budget 2025) vs Old Tax Regime

Aspect New Tax Regime (Post-Budget 2025) Old Tax Regime
Basic Exemption Limit ₹4,00,000 ₹2,50,000
Zero Tax Income Limit ₹12,00,000 (with 87A rebate) ₹5,00,000 (with 87A rebate)
Section 87A Rebate ₹60,000 (for income up to ₹12 lakh) ₹12,500 (for income up to ₹5 lakh)
Deductions (80C, 80D, HRA, etc.) Not available Available
Tax Calculation Simplicity Easier More complex

ALSO READ: Budget 2025: Finance Minister Announces Major Tax Relief for Middle-Class


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