Budget Update 2025
No Income Tax on Annual Income Up to ₹12.75 Lakh!
The government has raised the Section 87A rebate limit from ₹7 lakh to ₹12 lakh, providing major tax relief to the middle class. Salaried individuals can also claim a ₹75,000 standard deduction, making incomes up to ₹12.75 lakh tax-free.
New Slab Structure under new tax regime:
- ₹0 – ₹4 lakh → No Tax
- ₹4 lakh – ₹8 lakh → 5%
- ₹8 lakh – ₹12 lakh → 10%
- ₹12 lakh – ₹16 lakh → 15%
- ₹16 lakh – ₹20 lakh → 20%
- ₹20 lakh – ₹24 lakh → 25%
- ₹24 lakh & above → 30%
Extended time for filing updated returns (ITR-U):
Taxpayers now get 4 years (instead of 2) to update their Income Tax Returns.
These changes will be effective from 1 April 2025 i.e. for FY 2025-26
What are the Income Tax Slabs under New Regime vs. Old Regime?
A taxpayer is required to calculate and pay taxes based on the slab rate to which he/she belongs. Given below are the currently prevailing slab rates under the new and old regimes -
Old Tax Regime FY 2024-25, FY 2025-26
| Range of Income (Rs.) |
Tax Rate |
| Up to 2,50,000 |
Nil |
| 2,50,000-5,00,000 |
5% |
| 5,00,000-10,00,000 |
20% |
| Above 10,00,000 |
30% |
New Tax Regime FY 2024-25, FY 2025-26
| Income Slab (Rs) |
New Tax Regime Rate FY 2025-26 |
Income Slab (Rs) |
New Tax Regime Rate FY 2024-25 |
| Up to 4 lacs |
Nil |
Up to 3 lacs |
Nil |
| 4 lacs - 8 lacs |
5% |
3 lacs - 7 lacs |
5% |
| 8 lacs - 12 lacs |
10% |
7 lacs - 10 lacs |
10% |
| 12 lacs - 16 lacs |
15% |
10 lacs - 12 lacs |
15% |
| 16 lacs - 20 lacs |
20% |
12 lacs - 15 lacs |
20% |
| 20 lacs - 24 lacs |
25% |
Above 15 lacs |
30% |
| Above 24 lacs |
30% |
|
|
Tax calculation under the Old Regime for tax on 20 lakh salary
| Gross Salary |
2000000 |
| Less: |
|
| HRA |
200000 |
| LTA |
40,000 |
| Reimbursements |
24,500 |
| Children education and hostel allowance |
9,600 |
| Standard Deduction |
50,000 |
| Professional Tax |
2400 |
| Taxable Salary Income |
|
| Less: Deductions |
|
| 80C |
150000 |
| 80D |
50,000 |
| 80E |
22,000 |
| Net Taxable Income |
1,451,500 |
| Tax on the above income |
2,47,950 |
| Rebate u/s 87A |
Not applicable |
| Total Tax |
2,57,868 |
| Apart from this, you can also claim these tax deductions if eligible: |
|
| Interest on home loan EMIs under Section 24b |
-2,00,000 |
| The principal amount of the home loan under section 80EEA |
-1,50,000 |
| National Pension Scheme (NPS) investments u/s 80CCD(1B) |
-50,000 |
Tax calculation under New Regime for tax on 20 lakh salary
The following deductions are available under the new regime -
- Standard Deduction - ₹50,000
- Section 80CCD(2) - Employer’s contribution to NPS
- Section 80CCH - Investment made in Agniveer corpus
| Gross Salary |
20,00,000 |
| Less: |
|
| Standard Deduction |
(50,000) |
| Taxable Salary Income |
19,50,000 |
| Less: Deductions |
|
| 80C |
N.A. |
| 80D |
N.A. |
| 80E |
N.A. |
| Net Taxable Income |
14,47,100 |
| Tax on the above income |
2,85,000 |
| Cess @4% |
11,400 |
| Total Tax |
2,96,400 |
What are the Exemptions in Income Tax for 20 lakhs Salary?
There are various components of your total salary or CTC. Many components of your salary are exempt from income tax. Here’s how your salary is structured -
Annual Salary - Exemptions = Taxable Salary
Taxable Salary = Income - Deductions = Net Taxable Salary
*Please note that most exemptions and deductions are available only in the old tax regime.
Here’s the structure of CTC and the exemptions -
| Salary Component |
Taxability |
| Basic |
Fully-taxable |
| Dearness Allowance |
Fully-taxable |
| House Rent Allowance (HRA) |
Exempt partially using the HRA calculator |
| Leave Travel Allowance (LTA) |
Ticket expenses for up to 2 trips in 4 years are exempt under section 10(5). |
| Mobile/ Internet reimbursement |
The exemption is given if it is used for office purposes. |
| Children's Education and Hostel Allowance |
Rs. 4800 per child for a maximum of 2 children |
| Food |
Rs. 50 per meal up to a maximum of 2 meals
Annual = 31,200 (50*2*26 days*12 months) |
| Standard Deduction |
Rs 50,000, applicable to all |
| Professional Tax |
Generally Rs 2,400 (Varies according to state) |
How to Reduce Your Taxable Income Legally?
Want to save on taxes while staying 100% compliant? Here are some smart and legal ways to reduce your taxable income:
- Maximize 80C Deductions – Invest in PPF, EPF, ELSS, tax-saving FDs, and LIC policies (up to ₹1.5 lakh).
- Claim HRA & Home Loan Benefits – Save tax on rent paid and home loan interest under Section 10(13A) & 24(b).
- Opt for NPS & Retirement Savings – Avail additional ₹50,000 deduction under 80CCD(1B) for NPS contributions.
- Utilize Medical Insurance & Health Expenses – Get up to ₹75,000 deduction under Section 80D for medical insurance.
- Save on Education Loans & Donations – Claim interest on education loans (80E) & donations to charities (80G).
- Choose the Right Tax Regime – Compare old vs. new tax regime to pick the one that minimizes your tax outgo.
Plan ahead, invest wisely, and maximize deductions to legally reduce your taxable income! Need expert guidance? Connect with tax experts
What are the Deductions Available to Save Taxes?
Below are the various deductions available under the old tax regime -
| Section 80D - health insurance premium |
Exempt up to ₹25,000 for self, dependent children, and spouse.
Rs 50,000 for senior citizens aged 60 years or more.
Exempt up to Rs 25,000 for parents and 50,000 for people above 60 years
|
| Section 80E - Education loan |
A deduction is available on interest for 8 years from the year of repayment taken for the higher education of self, children, or spouse. |
| Section 80G - Donating to charity |
50% or 100% of the eligible amount |
| Section 80C - Investing in tax-saving instruments |
Tax benefit of Rs.1,50,000 per year. You can invest in the following options:
- Equity Linked Saving Scheme funds (ELSS)
- Employees’ Provident Fund (EPF)
- Home loan repayment and Stamp duty
- Public Provident Fund (PPF)
- National Savings Certificate (NSC)
- Sukanya Smriddhi Yojana (SSY)
- Fixed Deposit for 5 years, and more
|
| Section 80DD - Costs to treat disabled dependents |
Medical expenses of disabled dependents are deductible up to -
- 40% disability: Rs.75,000
- 80% disability: Rs.1,25,000
|
| Home loan payments |
Principal amount: Upto Rs 1.5 lakhs u/s 80C
Interest amount: Upto Rs 2 lakhs paid u/s 24b
|
| Maturity amount of a Life Insurance Policy |
Maturity proceeds are tax-exempt if the sum assured is less than
- – 20% for policies issued before 1 April 2012
- – 10% for policies issued after 1 April 2012
- – 15% for policies issued after 1 April 2013 for a person with a disability.
|
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