New Tax Regime 2025: The Union Budget 2025 has brought significant changes to India’s income tax regime, affecting millions of taxpayers. Finance Minister Nirmala Sitharaman announced revised income tax slabs for Assessment Year (AY) 2025-26, aiming to increase disposable income, boost savings, and simplify the tax structure.
The revised New Tax Regime offers higher exemptions and lower tax rates than the previous structure. Most notably, individuals earning up to ₹12 lakh annually will now pay zero tax, a significant shift from the earlier threshold of ₹7 lakh.
This article provides a detailed breakdown of the new income tax slabs, key highlights, benefits, and how these changes impact different taxpayer categories.
New Tax Regime 2025
| Feature | Details |
|---|---|
| Highest Tax-Free Income Limit | ₹12 lakh (up from ₹7 lakh) |
| New Tax Slabs Introduced | Income above ₹24 lakh taxed at 30% |
| Standard Deduction Increased | ₹75,000 (up from ₹50,000) |
| Impact on Middle-Class Earners | Lower tax rates increase disposable income |
| Total Revenue Impact | ₹1 trillion annual tax revenue foregone |
| Applicable Financial Year | FY 2024-25 |
| Official Tax Department Resource | Income Tax Department |
The New Tax Regime for AY 2025-26 marks a significant step toward simplifying tax filing, reducing the tax burden, and boosting disposable income. By raising the tax-free income limit to ₹12 lakh and increasing the standard deduction, the government aims to provide relief to millions of taxpayers while fostering economic growth.
Taxpayers are encouraged to carefully review the New Tax Regime, compare it with the Old Regime, and make informed financial decisions when filing their Income Tax Returns (ITR).
New Income Tax Slabs for AY 2025-26
The income tax slabs for AY 2025-26 under the New Tax Regime are as follows:
| Annual Income (₹) | Tax Rate |
|---|---|
| 0 – 4,00,000 | Nil |
| 4,00,001 – 8,00,000 | 5% |
| 8,00,001 – 12,00,000 | 10% |
| 12,00,001 – 16,00,000 | 15% |
| 16,00,001 – 20,00,000 | 20% |
| 20,00,001 – 24,00,000 | 25% |
| Above 24,00,000 | 30% |
These changes mark a significant shift in tax policy, offering greater relief to middle-income earners and simplifying the structure.
Standard Deduction & Other Benefits
1. Higher Standard Deduction
- The standard deduction has been increased to ₹75,000, allowing salaried individuals to claim a higher tax-free portion of their income.
2. No Tax on Income up to ₹12 Lakh
- Previously, the tax exemption limit was ₹7 lakh. Now, individuals earning up to ₹12 lakh annually will pay zero tax after deductions.
3. Reduced Tax Liability for Middle-Class Earners
- For example, under the old regime, a person earning ₹10 lakh annually had to pay ₹52,000 in taxes. Under the New Tax Regime, their tax liability is now zero.
Who Benefits from the New Tax Regime?
1. Salaried Individuals & Middle-Class Earners
- With higher standard deductions and lower tax rates, salaried individuals will see a significant increase in their take-home salary.
2. Small Business Owners & Self-Employed Individuals
- Taxpayers who opt for the New Tax Regime can retain more income for investment and business expansion.
3. High-Income Earners
- While tax rates remain progressive, individuals earning above ₹24 lakh annually will continue to be taxed at 30%, but they still benefit from the higher exemption limit.
4. Senior Citizens
- Senior citizens earning up to ₹12 lakh will pay zero tax, ensuring greater financial security for retirees.
Comparing the Old vs. New Tax Regime
| Feature | Old Regime | New Regime (AY 2025-26) |
|---|---|---|
| Tax-Free Limit | ₹7 lakh | ₹12 lakh |
| Standard Deduction | ₹50,000 | ₹75,000 |
| Tax on ₹10 Lakh Income | ₹52,000 | ₹0 |
| Highest Tax Rate | 30% on income above ₹15 lakh | 30% on income above ₹24 lakh |
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New Tax Regime 2025 File Taxes Under the New Regime
- Choose the Right Tax Regime: Taxpayers can choose between the Old and New Tax Regime while filing their Income Tax Returns (ITR).
- Claim Deductions: Under the New Tax Regime, taxpayers benefit from higher standard deductions but must forgo other exemptions such as 80C (PPF, ELSS), 80D (Health Insurance), and HRA.
- Calculate Tax Liability: Use an income tax calculator to determine your final taxable income based on the revised slabs.
- File Income Tax Returns (ITR): Visit the Income Tax Department’s official website to file returns online.
FAQs On New Tax Regime 2025
1. Who benefits the most from the New Tax Regime?
- Middle-class taxpayers and salaried individuals earning up to ₹12 lakh benefit the most due to higher exemptions and lower tax rates.
2. Is it mandatory to opt for the New Tax Regime?
- No, taxpayers can still choose between the Old and New Tax Regime while filing their returns.
3. Are deductions like 80C, 80D, and HRA allowed under the New Tax Regime?
- No, these exemptions are not available. However, the higher standard deduction helps compensate for these exclusions.
4. How much tax does someone earning ₹15 lakh pay under the New Tax Regime?
- A person earning ₹15 lakh annually will now pay only ₹45,000, compared to ₹1,87,500 under the old system.
5. Where can I check official updates on tax rates?
- Visit the Income Tax Department’s official website for full details.
