Posted on February 22, 2025, by Niftynews
The new income tax 2025 introduced by the Finance Bill 2025 brings significant changes to income tax slabs and rebate benefits for individual taxpayers. With these updates, the government aims to provide more tax relief, especially to the middle-income groups. In this article, we will break down the new income tax 2025 structure, the benefits of tax rebates, and how the changes will impact your tax calculations going forward.
New Income Tax Structure Under Finance Bill 2025
One of the key changes introduced by the Finance Bill 2025 is the increase in the income tax rebate under Section 87A. The income threshold for claiming this rebate has been raised from ₹7 lakh to ₹12 lakh under the new income tax 2025 regime. This means that individuals earning up to ₹12 lakh annually will be exempt from paying income tax under the new income tax 2025 rules.
Additionally, the standard deduction of ₹75,000 has raised the tax-free threshold to ₹12.75 lakh. Individuals with total income up to ₹12.75 lakh will not be required to pay any income tax. This change is expected to benefit the middle-income group, offering them significant tax relief.
Updated Income Tax Slabs for Assessment Year 2026-27
The new income tax 2025 includes revised tax slabs for the Assessment Year 2026-27. Below is a breakdown of the proposed tax slabs:
| Income (₹) | Tax on Slabs and Rates (₹) | Benefit of Rate/Slab (₹) | Rebate Benefit (₹) | Total Benefit (₹) | Tax After Rebate Benefit (₹) |
|---|---|---|---|---|---|
| Present | Proposed | Full up to ₹12 Lakh | |||
| 8 Lakh | 30,000 | 20,000 | 10,000 | 20,000 | 30,000 |
| 9 Lakh | 40,000 | 30,000 | 10,000 | 30,000 | 40,000 |
| 10 Lakh | 50,000 | 40,000 | 10,000 | 40,000 | 50,000 |
| 11 Lakh | 65,000 | 50,000 | 15,000 | 50,000 | 65,000 |
| 12 Lakh | 80,000 | 60,000 | 20,000 | 60,000 | 80,000 |
| 16 Lakh | 1,70,000 | 1,20,000 | 50,000 | 0 | 50,000 |
| 20 Lakh | 2,90,000 | 2,00,000 | 90,000 | 0 | 90,000 |
| 24 Lakh | 4,10,000 | 3,00,000 | 1,10,000 | 0 | 1,10,000 |
| 50 Lakh | 11,90,000 | 10,80,000 | 1,10,000 | 0 | 1,10,000 |
Tax Benefits Under the New Income Tax 2025 Structure
As mentioned earlier, the changes in the new income tax 2025 regime will provide several tax benefits. Key highlights include:
- Section 87A Rebate: Individuals earning up to ₹12 lakh will be eligible for a tax rebate of ₹60,000, effectively making their income exempt from taxes. This is a major benefit under the new income tax 2025 rules for middle-income earners.
- Marginal Relief: For those with incomes slightly above ₹12 lakh, marginal relief will apply, which ensures that the tax liability does not increase disproportionately. This rule helps taxpayers whose income exceeds ₹12 lakh but stays below the ₹12.75 lakh threshold.
Example of Tax Calculation with Rebate and Marginal Relief
To better understand how the new income tax 2025 structure works, here’s an example of how tax rebate and marginal relief will apply:
Scenario 1:
- Income: ₹12.1 lakh
- Tax Without Rebate: ₹61,500
- Rebate of ₹60,000: Reduces tax liability to ₹1,500
- Marginal Relief: Since the income exceeds ₹12 lakh by ₹10,000, marginal relief is applied to reduce the tax further.
- Tax Payable After Relief: ₹10,000
This ensures that individuals with incomes slightly above ₹12 lakh won’t face an unfair increase in tax liability.
Impact on Taxpayers and Long-Term Savings Under the New Income Tax 2025
The new income tax 2025 regime represents a fairer tax system, especially for the middle-income group. By raising the tax-free threshold to ₹12.75 lakh, the government ensures that many taxpayers can now enjoy tax-free income.
For those earning above ₹12.75 lakh, the marginal relief ensures that the tax burden remains manageable, leading to better financial planning. This will allow taxpayers to save and invest more, thereby contributing to long-term wealth creation.
Conclusion: Key Takeaways
The Finance Bill 2025 introduces substantial tax relief for individual taxpayers, especially those earning up to ₹12 lakh. With the introduction of the Section 87A rebate and marginal relief for those earning slightly above ₹12 lakh, the new income tax 2025 regime creates a more equitable system. The updated tax slabs simplify tax calculations, ensuring that taxpayers benefit from reduced tax liabilities and have more funds available for savings and investments.
