Important Changes in Income Tax from 1st April 2025
The Finance Minister announced several important changes in the 2025 budget speech. These changes will affect the taxpayers positively and they will be enabled to save a lot more on taxes. Norms are relaxed so that compliance becomes easier for taxpayers. More deductions and an increased amount of rebates will come into effect from the 1st of April 2025. This article discusses the important changes in income tax from the beginning of FY 2205-26 and AY 2206-27. File your ITR now to avoid last-minute chaos.
New Income Tax Slabs in FY 2025-26 under Section 115BAD
It is a big step to boost the spending power of consumers that the government has revised the income tax slabs in 2025. The middle-class households are going to benefit the most under the revised tax regime. The Union Government took the move so that more and bigger financial relief could be provided to the growing middle class and salaried individuals. Under the revised slab rates, individuals earning up to Rs 12L annually are exempt from taxes, whereas the highest tax-exempt limit was Rs 7L under the previous tax regime. The table below gives a glimpse of the changes:
| Under the Old Tax Regime (₹ in Lakhs) | Revised Tax Rates (₹ in Lakhs) | Tax Rates % |
| 0-3 | 0-4 | Nil |
| 3-7 | 4-8 | 5 |
| 7-10 | 8-12 | 10 |
| 10-12 | 12-16 | 15 |
| 12-15 | 16-20 | 20 |
| — | 20-24 | 25 |
| Above 15 | Above 24 | 30 |
Rebate under Section 87A
Section 87A of the Income Tax Act of 1961 mentions a rebate for taxpayers. Under income tax, rebate refers to the amount deductible from the total taxable income in a financial year. The rebate amount reduces the tax liabilities of taxpayers and the government provides rebates based on the income revised every year. The latest announcement was made in the 2025 budget, where the amount of the rebate was increased to Rs 60,000 up to the income of Rs 12 lakhs from Rs 25,000 up to the income of Rs 7 lakhs. However, under the old tax regime, the rebate amount is Rs 12,500 up to an income of Rs 5 lakhs.
Old Tax Regime
- Gross Total Income: ₹4,90,000
- Deductions: ₹40,000 (example: under section 80C)
- Taxable Income: ₹4,50,000
- Tax Payable (under slab rates): ₹12,500
- Rebate under Section 87A: ₹12,500
- Final Tax Payable: ₹0
New Tax Regime
- Gross Total Income: ₹12L
- Deductions: Not available under the new regime except salaried persons with income ₹12.75L
- Taxable Income: ₹12L
- Tax Payable (under slab rates): ₹60K
- Rebate under Section 87A: ₹60K
- Final Tax Payable: ₹0
Standard Deductions for Salaried Individuals
Salaried persons can now deduct up to Rs 75,000 as a standard deduction, applicable from the 1st of April 2025. The deduction amount of Rs 75,000 is available for salaried persons. If a salaried person’s income is Rs12.75 Lakh, there is no tax payable by that person as they will avail Rs 75,000 as standard deductions, and there is no tax on income up to Rs 12L.
Under the old tax regime, Rs 50,000 was allowed as the standard deduction for salaried individuals on the annual income of Rs 7L. If anyone still wants to opt for the old tax regime, they are free to choose.
The salaried persons and individuals receiving pension can claim the standard deductions as freelancers, business owners, and professionals cannot claim these deductions. Income from rent, capital gains, interest or business cannot be considered for standard deductions as well.
Taxation of ULIPs
The taxation of unit-linked insurance plans (ULIPs) changed after the 2025 budget declaration. ULIPs’ proceeds, not exempted under section 10(10D), will now be classified as capital assets and fall under the category of equity-oriented funds. Hence, gains from ULIP will be taxed as capital gains. Short-term capital gains are taxed at 20% while long term capital gains are taxed at 12.5% without any indexation benefit.
Proceeds from ULIPs are exempt from tax under section 10(10D) if the annual premium does not exceed Rs 2.5L; all these changes are applicable from the 1st of April 2025.
Updated ITR
Now, taxpayers can disclose their previously undisclosed income under ITR-U as the deadline has been increased. Initially, taxpayers had 12 months to report the ITR-U while to encourage them, the government has increased the duration to 48 months.
Tax Exemption for Start-Ups
Under section 80-IAC, each start-up incorporated after the 1st of April 2030 will get a 100% deduction of profits and gains for three consecutive years out of 10 years after the year of incorporation. The deduction will be subject to certain conditions.
The turnover limit for start-ups is up to Rs 100Cr. And period of incorporation is extended by 5 years to allow more start-ups get benefit from it.
| Parameters | Incorporated Year | Tax Holiday Period |
| Current Incentive | 01.04.2016-01.04.2025 | 3 years out of 10 years |
| Revised Incentive | Before 01.04.2030 | Now extended to a further 5 years |
Get Started with TaxDunia
These are the updated changes proposed in 2025 budget by the finance minister. To get the best of available tax deductions and exemptions for taxpayers and start-ups, reach out to TaxDunia. We ensure that you not only met smooth liabilities but also save a lot taxes legally. Do not focus on tax evasion as we here offer tax optimization with comprehensive advice and personalized solutions with real time updates.
