Major Income Tax Changes from April 1, 2025: New Slabs, TDS Updates & Higher Rebates

The Union Budget 2025 has introduced sweeping changes to the income tax system, offering substantial relief to middle-class taxpayers and fostering economic growth. Announced by Finance Minister Nirmala Sitharaman, these reforms will be implemented from April 1, 2025, marking a pivotal shift in the taxation landscape. Key highlights include revised tax slabs, increased rebates, and modifications to the Tax Deducted at Source (TDS) structure.

Revamped Tax Slabs Under the New Regime

The government has significantly altered the tax structure, bringing relief to individuals earning up to Rs 12 lakh annually, who will now be exempt from taxation. The revised tax slabs are as follows:

• Up to Rs 4 lakh – No tax
• Rs 4 lakh to Rs 8 lakh – 5%
• Rs 8 lakh to Rs 12 lakh – 10%
• Rs 12 lakh to Rs 16 lakh – 15%
• Rs 16 lakh to Rs 20 lakh – 20%
• Rs 20 lakh to Rs 24 lakh – 25%
• Above Rs 24 lakh – 30%

Additionally, salaried employees under the new tax regime will benefit from an increased standard deduction of Rs 75,000, easing their tax burden further.

Enhanced Tax Rebate Under Section 87A

A significant boost for taxpayers comes in the form of an increased rebate under Section 87A. The rebate limit has been raised from Rs 25,000 to Rs 60,000, ensuring that individuals earning up to Rs 12 lakh annually will not be liable to pay any tax. This move effectively raises the tax-free income threshold, providing much-needed financial relief.

TDS and Rental Income Reforms

In a bid to simplify taxation and ease financial stress, key modifications have been introduced to the TDS system:

• The TDS exemption limit for senior citizens has been doubled to Rs 1 lakh, reducing their tax deduction burden.
• The tax rebate on rental income has been increased to Rs 6 lakh, benefiting property owners, especially in urban areas where rental earnings are higher.

Extended ITR-U Filing Window

To make tax compliance more flexible, the government has extended the deadline for filing updated tax returns (ITR-U) from 12 months to 48 months. This allows taxpayers more time to rectify missed filings and avoid severe penalties.

Incentives for Startups

Encouraging entrepreneurship and innovation, startups commencing operations before April 1, 2030, will be eligible for a 100% tax exemption for three years within their first decade. This initiative aims to support the growth of new businesses and boost economic development.

A Tax System Aligned for Growth

With these revised tax slabs, increased rebates, and relaxed filing deadlines, the new tax regime is designed to be more streamlined and beneficial, particularly for middle-class taxpayers. These reforms, set to take effect in the 2025-26 financial year, signal a forward-thinking approach to tax management, ensuring broader financial relief and economic progress.