The new income tax slabs announced during Budget 2025-26 are all set to simplify tax filing while offering more savings! Coming into effect starting April 1, 2025, the middle class segment is expected to benefit the most, thanks to revised tax slabs and a focus on increasing disposable income.
Wondering how these changes will impact you? Here’s a complete guide to the new tax regime, its advantages, and what it means for your finances.
Key Highlights of Income Tax Slabs for FY 2025-26
A major highlight of Budget 2025-26 was the change in income tax regulations. One of the most important updates for the middle class is ‘zero’ income tax for those earning up to ₹12 lakh, or ₹12.5 lakh for salaried individuals with a ₹75,000 deduction. Unless taxpayers actively opt for the old regime if they want deductions and exemptions, the new regime applies by default.
The revised slabs under the new tax regime are as follows:
|
Total Income
|
Rate of Tax
|
|
0 to 4 lakh Rupees
|
Nil
|
|
4 to 8 lakh Rupees
|
5%
|
|
8 to 12 lakh Rupees
|
8%
|
|
12 to 16 lakh Rupees
|
15%
|
|
16 to 20 lakh Rupees
|
20%
|
|
20 to 24 lakh Rupees
|
25%
|
|
Above 24 lakh Rupees
|
30%
|
Let’s look at some key income tax reforms as per Budget 2025-26:
- Increase in Tax Rebate Under Section 87A
The rebate has been increased to ₹60,000/- which ensures that individuals with a net taxable income of up to ₹12 lakhs pay no income tax. After applying revised tax slabs and deductions, the rebate offsets the payable tax, ensuring nil tax for eligible taxpayers.
- No Tax on Second Self-Occupied House
Earlier, only one self-occupied house was tax-free, while the second was taxed on its notional rental value. Starting April 1, 2025, homeowners can own two self-occupied properties without paying extra tax. This update eases the financial burden on property owners and encourages real estate investment.
- Higher Interest Deduction For Senior Citizens
The tax-free limit on interest income for senior citizens has been increased from ₹50,000/- to ₹1 lakh, helping them boost retirement savings and reducing tax liabilities.
With updated tax slabs and increased exemptions, Budget 2025-26 delivers tax benefits that favor salaried individuals and senior citizens. These new reforms aim to ease financial burdens and encourage better financial planning for individuals and families.
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Disclaimer: The article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of The South Indian Bank Ltd. or its employees. The South Indian Bank Ltd and/or the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial/non-financial decisions based on the contents and information’s in the blog article. Please consult your financial advisor or the respective field expert before making any decisions.