Budget 2025: Salaried People With Incomes Between Rs 12-24 Lakh To See 25-31% Tax Reduction

Finance Minister Nirmala Sitharaman has introduced a revised new tax regime aimed at reducing the tax burden by 25% to 100% for individuals earning up to Rs 24 lakh.

Understanding the Revised Tax Slabs: Key Changes for the Financial Year 2025-26

In the upcoming financial year, the government has unveiled revised tax slabs, offering a simplified approach to personal taxation, reported Business Standard.

Key Highlights:

- Relief for the Middle Class: The threshold for lower tax rates has been extended to Rs 4 lakh (up from Rs 3 lakh previously), enabling individuals earning between Rs 3-4 lakh to benefit from zero tax.

Rate Reduction: Those in the Rs 20-24 lakh income bracket will now pay a reduced tax rate of 25%, down from the previous 30%.

Unchanged High-Income Slabs: The tax rates for higher income earners above Rs 24 lakh remain unchanged at 30%.

- The revised tax slabs provide relief for middle-income taxpayers, especially those earning in the Rs 4-24 lakh range, while maintaining the existing structure for high-income earners.

Who Benefits the Most?

According to an analysis by Value Research, the key beneficiaries are as follows:

Taxpayers earning below Rs 12 lakh (or Rs 12.75 lakh for salaried individuals) will now pay zero tax due to the revised tax structure and standard deductions.

Those earning between Rs 12 lakh and Rs 24 lakh (or Rs 24.75 lakh for salaried individuals) will pay 25-31% less tax.

Individuals with an annual income exceeding Rs 24 lakh will save Rs 1.1 lakh in taxes under the proposed regime.

Biggest Takeaway?

"The revised new tax regime offers significant relief to a large segment of taxpayers. With zero tax liability for those earning below Rs 12 lakh and substantial tax savings of up to Rs 1.1 lakh for higher earners, the proposed changes encourage individuals to opt for the simplified structure. If you fall within the affected income range, it's advisable to assess your tax planning strategy to maximise savings under the new structure," said Value Research in a note.

Other Key Changes:

The limit for total income eligible for a rebate under Section 87A has been increased from Rs. 7,00,000 to Rs. 12,00,000 under the new regime, and consequently, the rebate limit has been raised from Rs. 25,000 to Rs. 60,000 (except for income taxed at special rates).

Under the new tax regime, the Section 87A tax rebate will not apply to special rate income (such as S. 111A, 112, etc.), while the old regime still provides a rebate for special rate income like short-term capital gains (STCG) covered under Section 111A and long-term capital gains (LTCG) covered under Section 112. Section 87A rebates were never available on long-term capital gains on equity (covered in Section 112A) in either regime, and no changes have been made in the budget regarding this.

The limit for Tax Deducted at Source (TDS) on interest for senior citizens has increased from Rs. 50,000 to Rs. 1,00,000, providing greater financial relief to retirees. Additionally, the limit for rent has been raised from Rs. 2,40,000 to Rs. 6,00,000, benefiting small taxpayers earning rental income.

The time limit to file an updated return has been increased from 2 to 4 years, allowing taxpayers to correct errors or omissions or file Income Tax Returns (ITR) if they haven't done so earlier.

The period for registration of smaller trusts has been extended from 5 to 10 years, provided that the total income, without giving tax benefits, does not exceed Rs. 5 crore during the preceding 2 years.

Under the NPS Vatsalaya scheme, which started on 18th September 2024, parents or guardians can open an account for a minor child's future benefit. A deduction of Rs. 50,000 for contributions made to the NPS Vatsalya account is now proposed under Section 80CCD(1B), similar to the deduction currently available for employer contributions to NPS under both the new and old regimes.

A higher TDS rate will now only apply in cases where PAN is not available, and the provision of higher TDS on payments to non-filers (of income returns) has been removed.

The Tax Collected at Source (TCS) threshold on remittances under the Liberalized Remittance Scheme (LRS) has been raised from Rs 7 lakh to Rs 10 lakh, and no TCS will apply on goods, although TDS on the sale of goods will continue. Additionally, TCS on education loans up to Rs 10 lakh (from specified financial institutions) will be removed.