New Income Tax Slabs for FY 2025-26 AY (2026-27)
The budget 2025 introduced new slab rates under section 115BAC, i.e., the new tax regime. Given below are the revised tax slab rates for FY 2025-26 -
| Income Tax Slabs |
Income Tax Rates |
| Upto Rs.4 lakh |
NIL |
| Rs. 4 lakh - Rs.8 lakh |
5% |
| Rs.8 lakh - Rs.12 lakh |
10% |
| Rs.12 lakh - Rs.16 lakh |
15% |
| Rs.16 lakh - Rs.20 lakh |
20% |
| Rs.20 lakh - Rs.24 lakh |
25% |
| Above Rs.24 lakh |
30% |
Note: The slab rates under the old tax regime for FY 2025-26 remain the same.
Rebate Under Section 87A
The rebate under section 87A for the taxpayers opting for the new tax regime for FY 2025-26 has been increased from Rs.25,000 to Rs.60,000. This means that the taxpayer can now enjoy a tax-free income of upto Rs.12 lakhs. Earlier, this limit was Rs. 7 lakhs.
However, the tax rebate for taxpayers opting for the old tax regime is Rs.12,500.
Furthermore, if we consider the standard deduction of Rs.75,000, the taxpayer can enjoy a total tax-free income of up to Rs.12,75,000.
Changes in Tax Deducted at Source
The TDS provisions will witness significant change starting April 1, 2025. The threshold limit for various TDS sections was increased for individuals and businesses. The threshold for TDS on interest received by senior citizens has been increased to Rs. 1,00,000, from the previous limit of Rs. 50,000. Furthermore, the thresholds for rent and commission were also increased. The table given below summarizes the TDS threshold limit for various sections -
| Section |
Before 1st April 2025 |
After 1st April 2025 |
| 193 - Interest on securities |
NIL |
10,000 |
| 194A - Interest other than Interest on securities |
(i) 50,000/- for senior citizens;
(ii) 40,000/- in case of others when the payer is the bank, cooperative society and post office
(iii) 5,000/- in other cases |
(i) 1,00,000/- for senior citizen
(ii) 50,000/- in case of others when the payer is a bank, cooperative society and post office
(iii) 10,000/- in other cases |
| 194 – Dividend, for an individual shareholder |
5,000 |
10,000 |
| 194K - Income in respect of units of a mutual fund |
5,000 |
10,000 |
| 194B - Winnings from lottery, crossword puzzle etc. & 194BB - Winnings from horse race |
Aggregate of amounts exceeding 10,000/- during the financial year |
10,000/- in respect of a single transaction |
| 194D - Insurance commission |
15,000 |
20,000 |
| 194G - Income by way of commission, prize, etc. on lottery tickets |
15,000 |
20,000 |
| 194H - Commission or brokerage |
15,000 |
20,000 |
| 194-I - Rent |
2,40,000 (in a financial year) |
50,000 per month |
| 194J - Fee for professional or technical services |
30,000 |
50,000 |
| 194LA - Income by way of enhanced compensation |
2,50,000 |
5,00,000 |
| 194T - Remuneration, Interest and Commission paid to partners |
NIL |
20,000 |
Changes in Tax Collected at Source
The table below summarizes the TCS changes that will be effective from April 1, 2025 -
| Section |
Before 1st April 2025 |
From 1st April 2025 |
| 206C(1G) – Remittance under LRS and overseas tour program package |
7 Lakhs |
10 Lakhs |
| 206C(1G) - Remittance under LRS for education if financed through educational loans |
7 Lakhs |
Nil |
| 206C(1H) - Purchase of Goods |
50 Lakhs |
Nil |
Updated Tax Return – ITR U
The deadline for filing an updated return was increased from 36 months to 48 months from the end of the relevant assessment year. This change will provide taxpayers with an opportunity to encourage them to disclose any previously undisclosed income and pay taxes on the same.
The additional tax liability for filing an updated return is given in the table below -
| If ITR-U filed within |
Additional Tax |
| 12 months from the end of the relevant AY |
25% of additional tax (tax + interest) |
| 24 months from the end of the relevant AY |
50% of additional tax (tax + interest) |
| 36 months from the end of the relevant AY |
60% of additional tax (tax + interest) |
| 48 months from the end of the relevant AY |
70% of additional tax (tax + interest) |
Benefits for IFSC
- The premium paid on a life insurance policy availed from an office in IFSC by non-residents is fully exempt under section 10(10D), without any maximum premium amount.
- The sunset dates for the commencement of operations of IFSC units for tax concessions have been extended to 31st March 2020.
Tax Exemption for Start-ups
Under section 80IAC, start-ups incorporated before 1st April 2030 will be allowed a 100% deduction of profits and gains for three consecutive years out of ten years from the year of incorporation, subject to certain conditions.
Omission of Section 206AB and 206CCA
From 1st April 2025, sections 206AB and 206CCA of the Income Tax Act will be omitted. This will help reduce the tax compliance burden on tax deductors and collectors.
Earlier, tax deductors or collectors had to identify whether the recipient had filed returns or not in order to determine the correct withholding tax. This led to a compliance burden, thus resulting in a delay in filing TDS and TCS returns.
Deduction on Remuneration Paid to Partners
The deduction limit for remuneration paid to partners in partnership firms and LLPs has been increased, allowing for higher tax deductions. The revised calculation limits provide greater flexibility in tax computation.
Here are the updated limits for maximum deductions on partners' remuneration:
| Book Profit |
Limit |
| On the first Rs.6,00,000 of book profit or loss |
Rs.3,00,000 or 90% of the book profit, whichever is higher |
| On the remaining balance of the book profit |
60% of the book profit |
Treatment of ULIPs as Capital Gains
The proceeds from ULIPs whose premium exceeds 10% of the assured amount or Rs. 2.5 lakhs annually will be treated as capital gains and will be taxed accordingly.
Relaxation of Deemed Let Out Property Provision
Previously, the annual value of up to two self-occupied properties was deemed NIL only if the owner couldn't occupy them due to employment, business, or professional commitments in another location. However, the Finance Bill 2025 has relaxed this condition. Now, individuals can declare up to two house properties as self-occupied and report NIL income, regardless of the reason for non-occupation. This change simplifies tax compliance and provides greater flexibility for homeowners.
Tax-Saving on NPS Vatsalya
Starting this financial year, salaried employees and other taxpayers can contribute to their children's NPS Vatsalya account and claim an additional deduction of ₹50,000 under the old tax regime. This move provides extra tax-saving benefits while securing the child's financial future.
While the changes in Budget 2025 will have a significant impact on your ITR filing for FY 2025-26, it is important to note that ITR filing for FY 2024-25 will be based on previous limits and provisions.
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