New rules from April 1: Zero tax on income up to Rs 12L, see all changes

The new financial year brings significant changes to income tax laws in India, effective April 1, 2025. These changes impact how tax is deducted from various income sources and the overall tax liability for incomes earned during the financial year 2025-26 (FY26). Here's a breakdown of the key changes:

 

New income tax slabs under the new tax regime

 

The new tax regime introduces revised income tax slabs with the highest tax rate of 30 per cent applicable to income above Rs 24 lakh. The new slabs are as follows:

 

Income up to Rs 4 lakh: Nil

 

Income from Rs 4 lakh to Rs 8 lakh: 5 per cent

 

Income from Rs 8 lakh to Rs 12 lakh: 10 per cent

 

Income from Rs 12 lakh to Rs 16 lakh: 15 per cent

 

Income from Rs 16 lakh to Rs 20 lakh: 20 per cent

 

Income from Rs 20 lakh to Rs 24 lakh: 25 per cent

 

Income above Rs 24 lakh: 30 per cent

 

Under the new tax regime, individuals can now enjoy zero tax on income up to Rs 12 lakh. Salaried individuals with an income of up to Rs 12.75 lakh will have no tax liability after accounting for a Rs 75,000 standard deduction. This benefit is achieved through a tax rebate under Section 87A of the Income Tax Act, 1961. Taxpayers must file their Income Tax Return (ITR) to claim this rebate.

 

Taxation tweaks for ULIPs

 

The taxation rules for Unit Linked Insurance Plans (ULIPs) have been revised. Proceeds from ULIPs which are not exempt under Section 10(10D) will now be considered capital assets and included under the definition of equity-oriented funds. Gains from these ULIP proceeds will be taxed as capital gains, with short-term gains taxed at 20 per cent and long-term gains at 12.5 per cent without indexation benefits. This rule applies to ULIPs with an annual premium exceeding Rs 2.5 lakh.

 

Rationalisation of TDS rates and thresholds

 

Key changes include a reduced TDS rate of 10 per cent for income payable by securitisation trusts to resident investors (Section 194LBC). Additionally, thresholds for various sections like 193, 194A, 194, 194K, 194B, 194BB, 194D, 194G, 194H, 194-I, 194J, and 194LA have been increased, providing taxpayers with more disposable income.

 

Higher TDS/TCS for ITR non-filers removed

 

The government has removed the provision for higher TDS and TCS on non-filers of ITRs, effective from April 1, 2025. This move aims to reduce compliance burdens for deductors and collectors.

 

Other key changes

 

Increased limits for medical treatments: Salaried employees are now eligible for tax-free perquisites on employer-incurred expenses for medical treatment-related travel outside India for themselves or family members.

 

Simplified calculation of annual value of self-occupied property: Taxpayers can claim the value of any two self-occupied houses as zero, simplifying ITR filing.

 

Section 80CCD deduction for NPS Vatsalya contributions: Contributions to NPS Vatsalya are now eligible for deduction under Section 80CCD, but only for those opting for the old tax regime.

 

Exemption from prosecution for delayed TCS Payments: Prosecution for delayed Tax Collected at Source (TCS) payments will not be initiated if the payment is made to the central government before the deadline for filing the quarterly statement.

 

Extended deadline to file updated return: Taxpayers now have 48 months from the end of the assessment year to file updated returns, compared to the previous 24 months.

 

Tax department to compare ITRs for irregularities: The Income Tax Department will now compare current and previous years' ITRs to identify irregularities.