Budget 2025 – The Union Budget 2025 is here, and it brings some significant changes to the taxation system. One of the biggest updates is the introduction of a 25% tax rate for a new income bracket, along with fresh deductions and relief measures. Whether you’re a salaried professional, business owner, or an investor, these changes could impact your financial planning for the coming year.
Budget 2025 New Tax 25% Rate & Fresh Deductions
| Change | Details |
|---|---|
| New Tax Rate | 25% tax rate introduced for incomes ₹15-20 lakh |
| Standard Deduction | Likely to increase from ₹75,000 to ₹1.2 lakh |
| Relief on Fuel Taxes | Possible excise duty reduction on petrol/diesel |
| Other Deductions | Potential hikes in HRA, Section 80C, and medical deductions |
| Corporate Tax Relief | Possibility of reduced corporate tax rates for MSMEs |
| Capital Gains Tax Changes | Restructuring of long-term capital gains (LTCG) tax slabs |
| Implementation Date | Expected from April 1, 2025 |
| Official Website | Income Tax Department |
Let’s break down these changes in a simple and easy-to-understand manner.
Understanding the New 25% Tax Rate
Currently, the tax slabs in India follow these general brackets:
- ₹0-3 lakh: No tax (Nil)
- ₹3-7 lakh: 5%
- ₹7-10 lakh: 10%
- ₹10-15 lakh: 20%
- Above ₹15 lakh: 30%
What’s New? For FY 2025-26, a new tax slab has been introduced:
- ₹15-20 lakh: 25% (instead of 30%)
Who Benefits from This?
This is great news for middle-to-upper income earners, especially salaried individuals, freelancers, and business professionals earning between ₹15-20 lakh annually. A reduced tax rate means more take-home pay and better savings.
Example Calculation
If you earn ₹18 lakh per year, under the previous system (30% tax rate), you would pay ₹5.4 lakh in tax. With the new 25% rate, you would pay ₹4.5 lakh, saving ₹90,000 annually!
Standard Deduction Increase
The standard deduction is the fixed amount deducted from your taxable income before calculating your tax liability.
- Current Deduction: ₹75,000 (for salaried individuals and pensioners)
- Proposed Deduction: ₹1.2 lakh
Why This Matters?
A higher deduction means lower taxable income, which translates into less tax liability and more money in your pocket.
For example, if your taxable income is ₹12 lakh, under the current deduction of ₹75,000, your taxable income would be ₹11.25 lakh. With the new deduction of ₹1.2 lakh, your taxable income reduces to ₹10.8 lakh, helping you save on tax.
Potential Reductions in Fuel Taxes
With rising fuel prices, the government is considering reducing excise duties on petrol and diesel, currently at 21% and 18%, respectively. If implemented, this could lead to a reduction in fuel costs, impacting transportation, logistics, and household budgets positively.
Who Will Benefit?
- Daily commuters – Lower fuel costs for personal vehicles.
- Transport businesses – Reduced operational costs.
- Industries reliant on logistics – More efficient pricing strategies.
Other Expected Tax Relief Measures
1. Increase in Section 80C Limit
Currently, Section 80C allows a maximum deduction of ₹1.5 lakh on eligible investments (PPF, EPF, ELSS, etc.). The government is considering increasing this limit to ₹2 lakh to encourage more savings and investments.
2. Higher HRA Exemption for Renters
House Rent Allowance (HRA) deductions may be increased to support urban renters facing rising housing costs.
3. Enhanced Medical Deductions
With medical expenses rising, Section 80D (health insurance premium deduction) may see an increase in limit from ₹25,000 to ₹50,000.
4. Corporate Tax Relief for MSMEs
The government is also considering reducing corporate tax rates for Micro, Small, and Medium Enterprises (MSMEs) to boost growth and employment opportunities.
5. Capital Gains Tax Adjustments
The long-term capital gains (LTCG) tax structure may be revised, potentially lowering tax rates for certain asset classes such as equity, real estate, and debt instruments.
How These Changes Impact You?
For Salaried Employees:
- Higher take-home salary due to tax slab change.
- Better savings through higher deductions (Standard, 80C, HRA).
For Business Owners:
- More disposable income due to lower taxes.
- Reduced transport costs if fuel duties are cut.
- MSME tax relief could lower business expenses.
For Investors:
- Higher 80C limit means more scope for tax-saving investments.
- LTCG tax adjustments could enhance investment returns.
- More liquidity due to lower tax outgo.
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FAQs about Budget 2025: New Tax 25% Rate & Fresh Deductions
1. When will these tax changes come into effect?
These changes will likely apply from April 1, 2025, once the budget is approved.
2. Will the old tax regime still be available?
Yes, taxpayers may still have the option to choose between the old and new tax regimes.
3. How much will I save with the new tax rate?
Savings depend on your income bracket. For those earning ₹18 lakh annually, the new tax slab will help save ₹90,000 per year.
4. Will there be changes in GST rates?
As of now, there is no confirmation of GST rate revisions in Budget 2025.
5. Where can I get official updates?
Visit the Income Tax Department or check the Union Budget announcements on Govt. of India Official Website.
