Salaried individuals earning between Rs 12-24 lakh will pay 25-31% less tax

Finance Minister Nirmala Sitharaman has proposed a revised new tax regime that aims to reduce the tax burden by 25 per cent to 100 per cent for incomes 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 introduced revised tax slabs, offering a more streamlined approach to individual taxation. Here's a breakdown of the key changes to the tax slabs: 

 

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), allowing individuals with earnings 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%, compared to the earlier 30% rate.
• 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 those with very high income. 

Who benefits the most? 

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

• 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 per cent less tax .
• Individuals with an annual income of above Rs 24 lakh will save Rs 1.1 lakh in taxes under the proposed regime.

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Value Research has estimated tax saving across different income levels: 

 

Biggest takeaway?

"The revised new tax regime presents a significant tax relief for 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 high earners, the proposed changes encourage individuals to opt for the simplified structure. If you fall within the affected income range, consider assessing your tax planning strategy to maximise savings under the new structure," said Value Research in a note. 

Other key changes:

Limit of Total Income for Rebate u/s 87A has been increased from Rs. 7,00,000/- to Rs. 12,00,000/- under new regime and in consequently the Limit of Rebate enhanced from Rs. 25,000/- to Rs.60,000/- (except for income taxed at special rates).

 

Under the new tax regime, Section 87A tax rebate will not available on any special rate income (such as S. 111A, 112 etc). Whereas, for the old tax regime, Section 87A tax rebate is still available on special rate income like STCG covered in Section 111A,LTCG covered in Section 112. Section 87A Rebate was never available on long term capital gain on equity (covered in Section 112A) under both regimes and no changes are made in the budget for the same.

 

Limit of TDS on interest for senior citizens increased from Rs. 50,000/- to Rs. 1,00,000/- which will provide greater financial relief to retirees. Further, Limit on Rent enhanced from Rs. 2,40,000/- to Rs.6,00,000/- benefitting small tax payers earning rental income.

 

Time limit to file updated return increased from 2 to 4 Years which will allow taxpayers correcting errors or omissions or allows to file ITR if they have not filed ITR.

 

Period of Registration of smaller trusts has been increased from 5 to 10 Years on the condition that Total income without giving tax benefit does not exceed Rs. 5 Crore during preceding 2 years.

 

 As per NPS Vatsalaya scheme Started from 18th September 2024, parents/guardian can open account for minor child future benefit. It is now proposed to provide deduction u/s 80CCD(1B) of Rs.50,000 for contribution made to NPS Vatsalya Account which will be similar to deduction available as per current provisions for employer contribution to NPS available under new old regime.

 

Provision of higher TDS rate will be applicable only in case PAN is not available and accordingly, provision of higher TDS on payment to non-filers (of return of income)

is removed.

 

The 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 be applicable on goods but TDS on sale goods will continue to apply. TCS on education loans up to Rs 10 lakh (from specified financial institutions) will be removed.