05/02/2025

Key changes in budget 2025 apart from tax-free 12 lakh income- Full details here

Financial Express

Among the most significant announcements was the introduction of a New Income Tax Bill, set to be tabled this week

The Finance Minister announcing Rs 12 lakh as tax-free income got the attention of most taxpayers in the Union Budget 2025 presentation on February 1. However, there were several other key tax reforms that are expected to have a big impact on individuals across income categories.

Among the most significant announcements was the introduction of a New Income Tax Bill, set to be tabled this week. This bill aims to simplify tax laws by reducing the number of existing sections from 298 to nearly half, ensuring better clarity and efficiency in tax administration.

1. Budget 2025: Key Announcements for TaxpayersBasic Exemption Limit Raised to Rs 4 Lakh
The government has proposed increasing the basic exemption limit under the new tax regime from Rs 3 lakh to Rs 4 lakh. As a result, individuals with an annual taxable income of up to Rs 4 lakh will have zero tax liability. Moreover, taxpayers opting for the new tax regime will not be required to file an income tax return if they do not meet other mandatory filing criteria.

2. Full Tax Rebate for Income up to Rs 12 LakhThe income threshold for availing a full tax rebate has been raised from Rs 7 lakh to Rs 12 lakh under the new tax regime. This means taxpayers earning up to Rs 12 lakh annually will pay no income tax. However, incomes subject to special tax rates, such as capital gains, are excluded from this rebate calculation.

3. Revised Income Tax Slabs
The new tax regime will feature an additional 25% tax bracket, expanding the total number of slabs to seven. The updated structure is as follows:

  1. ₹0 – ₹4,00,000: 0%
  2. ₹4,00,001 – ₹8,00,000: 5%
  3. ₹8,00,001 – ₹12,00,000: 10%
  4. ₹12,00,001 – ₹16,00,000: 15%
  5. ₹16,00,001 – ₹20,00,000: 20%
  6. ₹20,00,001 – ₹24,00,000: 25%
  7. ₹24,00,001 and above: 30%

While no changes have been made to surcharge and cess rates, taxpayers earning Rs 18 lakh annually will see savings of up to Rs 72,800, while those earning Rs 24 lakh will save Rs 1,14,400.