In India, the income tax rules undergo a revision with the budget, and this impacts everyone from an average citizen to a businessman. The government has made new promises for the financial year 2025-26 (assessment year 2026-27), which these new income tax regulations seem to have major benefits for the middle class. This article aims to explain the new rules regarding income tax slabs, exemptions and other important changes in plain words. Let’s take a look at how these changes will affect your savings.
New Tax Slab
In the latest developments, there is a change in the Income Tax slab for individual assessees which falls under the new rules. There shall be no tax up to ₹4 lakh. Subsequently, a 5% tax will be levied on income between ₹4 to ₹8 lakh, 10% from ₹8 to ₹12 lakh and 15% from ₹12 to ₹16 lakh. For high-income earners, tax will be 20% for ₹16 to ₹20 lakh, 25% for ₹20-24 lakh and 30% for income exceeding ₹24 lakh. This system will certainly aid individual taxpayers save more than the previous options provided.
Increase in Rebate
The new tax policy has raised the exemption limit to ₹60,000, thus resulting in no tax payable for income up to ₹12 lakh. For those in employment, this figure increases to ₹12.75 lakh owing to a standard deduction of ₹75,000. This change is great news especially for the middle class whereby their tax liability is null.
Old Vs New
The new tax system, which is more lenient, remains the default option. Taxpayers have the choice of switching to the old system, which allows them to make use of the income slabs up to ₹2.5 lakh in which income is tax-free along with several deductions like Section 80C and 80D. Under the new regime, investment deductions are not allowed though the slab rates are much better. Based on income and investments, taxpayers need to choose the best option for themselves.
TDS And TCS
On April 1, 2025, the TDS cap for rent will increase to ₹6 lakh. For senior citizens, the TDS cap for interest income will now be ₹1 lakh. Starting January 2025, TCS will apply to luxury items where tax will be charged for purchases exceeding ₹10 lakh. These will increase the stringency of tax compliance.
Share Buybacks
Now the taxation of buyback dividends will no longer have a flat 20% tax, but rather it will be paid at the shareholder’s applicable slab rate. Upper tier income group shareholders will be disproportionately affected by this change.
Conclusion
Everything changes with the new income tax slabs set for 2025, relaxing the rules for the middle class. New standard deductions, slab rates, increased exemptions, and more liberalised deductions give employed individuals a chance to save significantly. All this while balancing investments and income within the proper tax regime thresholds, making both choices considerably more rewarding. Despite making these strategies more effective, proper financial planning remains essential, especially after these changes.
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