Explained | All about changes in income tax slabs announced in Union Budget 2025

As per the initial reading of Union Budget 2025 documents, the Finance Minister tried hard to meet the decade-long demands of the desperate middle class, especially the salaried ones, which have become a reality today. The tax proposals are expected to provide much-needed relief to the common people.

Changes in income tax slabs under the new regime

The latest proposed tax slabs under new regime are – Income: Rs 0-4 lakh – Nil, Rs 4-8 lakh​ – 5 per cent, Rs 8-12 lakh - 10 per cent, Rs 12-16 lakh – 15 per cent, Rs. 16-20 lakh 20 per cent, Rs 20- 24 – 25 per cent and above Rs 24 lakh – 30 per cent plus applicable cess and surcharge.

Current tax slabs under the new regime are up to Rs 3 lakh – Nil, Rs, 3-7 lakh – 5 per cent, Rs 7-10 lakh – 10 per cent, Rs 10- to 12 lakh – 15 per cent, Rs 12 -15 lakh – 20 per cent and Rs 15 lakh and above – 30 per cent.  

Further, the income cap to avail the Rebate under Section 87A is proposed to increase from Rs 7 lakh to Rs 12 lakh and the Rebate amount from Rs 25,000 to Rs 60,000. In other words, no income tax on income up​ to Rs 12 lakh or an average income of Rs 1 lakh per month, excluding special rate income such as capital gains under the new regime. In addition, due to the standard deduction of Rs 75,000, the above limit will go up to Rs 12.75 lakh for salaried taxpayers.

As per recent reports, about 78 per cent of taxpayers have already switched to the new default regime.  With today’s proposals, many more taxpayers are expected to opt the default new regime henceforth.  

TDS and TCS rates

It is proposed to rationalise the TDS and TCS rates selectively.

Senior Citizens – Interest’s threshold cap for tax deduction will be increased to Rs 1 lakh from current Rs 50,000.

TDS on Rent - The annual cap will be increased to Rs 6 lakh from the current Rs 2.40 lakh.

TCS on foreign remittance – The TCS threshold cap will be increased to Rs 10 lakh from the current Rs 7 lakh.

The current higher deduction of 20 per cent TDS prevision will be applicable only in non-PAN cases, such as, if a taxpayer’s PAN rendered as inoperative can escape the higher TDS rate.

 The aforementioned rate rationalisation of TDS and TCS is expected to reduce the taxpayers' difficulties.

Updated return can be filed up to 4 years

A taxpayer who has filed either his/her return – including original, belated, revised or not filed at all – for an assessment year, currently has the option to file an updated return within 24 months from the end of the relevant assessment year, provided it results in an additional payment of tax to the exchequer. Now, it is proposed to allow filing an updated return up to 48 months from the end of the relevant assessment year.  

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Union Budget 2025 | Nirmala Sitharaman, as Finance Minister, presented her record 8th Union Budget this time. While inflation has burnt a hole in the pockets of 'aam janata', the Modi govt gave income tax relief for those making up to Rs 12 lakh per year in salaried income. Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.