In a bid to simplify taxation and provide relief to various segments of taxpayers, Finance Minister Nirmala Sitharaman unveiled several key changes in the Union Budget for 2025-26. Among the most notable adjustments are revisions to the Tax Deduction at Source (TDS) limits, the introduction of new tax slabs for individuals, and enhanced benefits for senior citizens. These changes are designed to reduce the tax burden on middle-class families, retirees, and those earning rental or interest income. Here’s a breakdown of the significant tax reforms announced in the budget.
What changes have been made to the personal income tax slabs?
The Finance Minister has introduced new tax slabs under the new tax regime for the financial year 2025-26:
- Income up to Rs 4 lakh: Nil tax
- Income between Rs 4 lakh and Rs 8 lakh: 5%
- Income between Rs 8 lakh and Rs 12 lakh: 10%
- Income between Rs 12 lakh and Rs 16 lakh: 15%
- Income between Rs 16 lakh and Rs 20 lakh: 20%
- Income between Rs 20 lakh and Rs 24 lakh: 25%
- Income above Rs 24 lakh: 30%
Individuals earning up to Rs. 12 lakh annually will pay no income tax, while tax rates progressively increase for higher income levels.
What does the new tax system mean for taxpayers earning up to Rs 12 lakh?
Under the new tax system, individuals with an income of up to Rs. 12 lakh will pay no income tax, offering significant relief to the middle class. Salaried taxpayers benefiting from a basic deduction of Rs. 75,000 will have a higher threshold of Rs. 12.75 lakh for the zero-tax category.
How does the Budget impact senior citizens in terms of interest income?
The Budget introduces a substantial increase in the tax deduction limit for interest income, raising it from Rs. 50,000 to Rs. 1 lakh for senior citizens. This change is aimed at reducing the tax burden on seniors who largely rely on interest from savings for their post-retirement income.
What are the key changes in the Tax Deduction at Source (TDS) limits?
The threshold for TDS on rent has been significantly increased from Rs. 2.40 lakh to Rs. 6 lakh per annum. This change is expected to ease the tax burden on individuals receiving rental income and simplify compliance for taxpayers.
Union Budget highlights: Finance Minister Nirmala Sitharaman announced a significant reform in the Insurance sector, allowing 100% Foreign Direct Investment (FDI). Industry leaders expect this move to attract substantial foreign investment, encourage innovation, and improve insurance penetration in India, aligning with the vision of ‘Insurance for All by 2047’. Read here what leaders said:
How does the surcharge system change in Budget 2025-26?
The surcharge on income tax for high earners has been revised as follows:
- Income between Rs 50 lakh and Rs 1 crore: 10% surcharge
- Income between Rs 1 crore and Rs 2 crore: 15% surcharge
- Income exceeding Rs 2 crore: 25% surcharge
The surcharge applies to individuals and families whose total income exceeds these thresholds.
Are there any changes to the advance tax system?
No significant changes have been made to the advance tax system for assessment year 2025-26. The existing provisions for advance tax, TDS from salaries, and other forms of tax payment will continue to apply in the same manner as in the previous year.
Union Finance Minister Nirmala Sitharaman is set to table the Union Budget 2025 today at 11 AM, marking her eighth consecutive budget.
What are the provisions regarding the surcharge on dividend income?For individuals with income from dividends or long-term capital gains exceeding Rs. 2 crore, the surcharge will not exceed 15% on this income. For other categories, the standard surcharge rates will apply based on the total income.
Is there any relief offered for high-income earners?
While the surcharge for income above Rs 2 crore has been kept at 25%, the government has introduced marginal relief measures for those facing a disproportionate tax burden due to the surcharge.
