Impact of Budget 2025 on Income Tax Slabs: What’s Changing?
New Delhi: A basic understanding of income tax slabs and how they change with every Union Budget can help you plan your finances better. The Budget isn’t just about government spending—it also determines how much tax you pay and whether you get any new benefits. Every year, taxpayers look forward to potential adjustments in slabs, […]
New Delhi: A basic understanding of income tax slabs and how they change with every Union Budget can help you plan your finances better. The Budget isn’t just about government spending—it also determines how much tax you pay and whether you get any new benefits. Every year, taxpayers look forward to potential adjustments in slabs, deductions or exemptions that could ease their tax burden.
With Budget 2025 now released, the changes are clear. Have the slabs been revised? Are there new tax-saving opportunities? This blog breaks down the key updates, so you know exactly what’s different and how it affects your take-home income.
Here’s the salary tax slab under the new tax regime applicable for FY 2025-2026:
| Income Tax Slabs | Tax Rates |
| Up to ₹4 lakhs | Nil |
| ₹4 lakhs to ₹8 lakhs | 5% |
| ₹8 lakhs to ₹12 lakhs | 10% |
| ₹12 lakhs to ₹16 lakhs | 15% |
| ₹16 lakhs to ₹20 lakhs | 20% |
| ₹20 lakhs to ₹24 lakhs | 25% |
| Above ₹24 lakhs | 30% |
Other Updates
Income up to ₹12 lakhs is now tax-free under the new tax regime due to the increased rebate under Section 87A, which has been raised from ₹25,000 to ₹60,000.
For salaried employees, the tax-free limit increases to ₹12.75 lakhs, considering the standard deduction of ₹75,000.
Individuals earning ₹12 lakhs annually will save ₹ 60,000 in taxes under the new regime, while those with higher incomes, such as ₹25 lakhs, could save up to ₹1.1 lakhs.
The rebate does not apply to special rate income, such as capital gains taxed under Section 112A. These will continue to be taxed as per existing rules.
Marginal relief is available for taxpayers, whose income slightly exceeds the ₹12 lakh rebate limit, ensuring they do not face a sudden tax jump.
The new tax regime remains the default option, but taxpayers still have the flexibility to choose the old regime if they prefer deductions and exemptions.
A new Income Tax Bill has been proposed in Parliament and while the updated tax slabs apply from April 1, 2025, the new Income Tax Act is expected to come into effect from April 1, 2026, if passed.
While the new tax slabs will apply from April 1, 2025, it’s important to note that the old and new tax regimes still function under the current Income Tax Act until the new bill is passed.
No additional deductions have been introduced under the new tax regime, apart from the unchanged ₹ 75,000 standard deduction for salaried taxpayers.
How To Choose Between New And Old Tax Regime?
Choosing between the new tax regime and the old tax regime depends on your income, deductions and how you prefer to manage your taxes.
For salaried individuals without business income, the choice can be made every financial year while filing the Income Tax Return (ITR). If you wish to continue with the old regime, you must opt out of the new regime by selecting the relevant option in the ITR form. This flexibility allows salaried taxpayers to evaluate their situation annually and choose the regime that results in lower tax liability.
For individuals with business income, the decision is more permanent. If you choose the old tax regime, you can continue with it. However, if you switch to the new tax regime, you cannot go back to the old one. Business owners opting for the old regime must also fill Form 10-IEA to confirm their choice.
The new tax regime is generally beneficial for those with income up to ₹12 lakhs, as they will not have to pay any tax after rebates. It also suits higher-income individuals who do not claim many deductions under Sections 80C, 80D, HRA or home loan interest. On the other hand, if you have substantial deductions (₹5-8 lakhs or more), the old tax regime may still result in lower tax liability.
Understanding exemptions, deductions and tax-saving investments helps you make the right choice between the two regimes. It further simplifies how to calculate taxable income. This allows you to assess which regime offers better savings and lower tax liability.
Final Notes
The Union Budget 2025 focuses on making taxation simpler and improving financial stability for individuals. With changes aimed to reduce the tax burden, especially under the new tax regime, it encourages savings and increases disposable income. At the same time, the budget also prioritises economic growth to invest in key sectors like infrastructure, agriculture and technology.
For taxpayers, these updates bring more clarity and options to plan their finances. Whether you prefer to maximise deductions or a straightforward tax structure, the latest changes ensure that you can make an informed decision based on what works best for you.
