Budget 2025: No Income Tax till Rs12 Lakh Income with Rebate under New Tax Regime
Moneylife Digital Team 01 February 2025
While revising the income-tax (I-T) slabs for individual taxpayers, Union finance minister (FM) Nirmala Sitharaman announced that, under the new tax regime, for income of up to Rs12 lakh, there will be no tax. The limit for salaried taxpayers will be Rs12.75 lakh with a standard deduction of Rs75,000.
 
Presenting the Budget for 2025-26, the FM says tax slabs and rates are being changed across the board to benefit all taxpayers. "Resident individuals with total income up to Rs7 lakh do not pay any tax due to rebate under the new tax regime. It is proposed to increase the rebate for the resident individual under the new regime so that they do not pay tax if their total income is up to Rs12 lakh. Marginal relief as provided earlier under the new tax regime is also applicable for income marginally higher than Rs12 lakh."
 
According to the FM, the new structure "substantially reduces taxes of the middle class and leaves more money in their hands, boosting household consumption, savings and investment."
 
"Right after 2014, the nil tax slab was raised to Rs2.5 lakh, which was further raised to Rs5 lakh in 2019 and to Rs7 lakh in 2023. This is reflective of our government's trust in the middle-class taxpayers. I am now happy to announce that there will be no income tax payable up to income of Rs12 lakh," Ms Sitharaman says.
 
 
As per the revised seven tax slabs, there will be no tax for income of up to Rs4 lakh. For income between Rs4 lakh and Rs8 lakh, the new tax rate would be 5%. For Rs8 lakh to Rs12 lakh, it will be 10%.
 
Income between Rs12 lakh and Rs16 lakh will be taxed at 15%. For incomes of Rs16 lakh to Rs20 lakh, the tax will be 20% and income between Rs20 lakh and Rs24 lakh will attract a tax of 25%. Incomes above Rs24 lakh will continue to be charged 30%. Last year, for income above Rs15 lakh, the tax rate was 30%.
 
To taxpayers up to Rs12 lakh of normal income (other than special rate income such as capital gains), a tax rebate is being provided in addition to the benefit due to slab rate reduction in such a manner that there is no tax payable by them, the FM says.

The total tax benefit of slab rate changes and rebates at different income levels can be illustrated with examples. A taxpayer in the new regime with an income of Rs12 lakh will get a benefit of Rs80,000 in tax (which is 100% of tax payable as per existing rates). A person with an income of Rs18 lakh will get a tax benefit of Rs70,000 (30% of tax payable as per existing rates). A person with an income of Rs25 lakh will get tax benefits of Rs1.10 lakh (25% of his tax payable as per existing rates).
 
Here are a few examples shared by the FM for the calculation of tax benefits... 
 
New tax rebate benefits for FY26
 
The new tax slabs under the new I-T regime will be effective 1 April 2025.
 
In the Budget, FM Sitharaman also provided much-needed relief on tax deduction at source (TDS) and tax collected at source (TCS) compliance. She says, "The limit for a tax deduction on interest for senior citizens is being doubled from the present Rs50,000 to Rs1 lakh. Similarly, the annual limit of Rs2.40 lakh for TDS on rent is being increased to Rs6 lakh. This will reduce the number of transactions liable to TDS, thus benefitting small taxpayers receiving small payments."

Further, the threshold for TCS on remittances under the Reserve Bank of India's (RBI) liberalised remittance scheme (LRS) is increased from Rs7 lakh to Rs10 lakh. "I also propose to remove TCS on remittances for education purposes, where such remittance is out of a loan taken from a specified financial institution."

"Both TDS and TCS are being applied on any transaction relating to the sale of goods. To prevent such compliance difficulties, I propose to omit the TCS. I also propose that the provisions of the higher TDS deduction will now apply only in non-PAN cases," the FM says.

In July 2024, the delay for payment of TDS up to the due date of filing the statement was decriminalised. Ms Sitharaman proposed to provide the same relaxation to TCS provisions as well.

Giving benefits to senior and very senior citizens, withdrawals made from National Savings Scheme accounts on or after 29 August 2024 have been exempted, the FM says, adding NPS Vatsalya accounts also to get similar benefits.

At present, taxpayers can claim the annual value of self-occupied properties as nil only when fulfilling certain conditions. "Considering the difficulties faced by taxpayers, it is proposed to allow the benefit of two such self-occupied properties without any condition," Ms Sitharaman says.

According to Anuj Puri, chairman of ANAROCK group, investors can now claim Nil valuation for two self-occupied properties instead of just one—a positive move for residential real estate investment. "The simplified TDS on rent decreases the compliance burden and enhances liquidity for landlords and will positively impact the rental housing market, especially in metro cities. Previously, homeowners could claim only one self-occupied property as tax-free, but now, they can claim two, thereby removing taxation on notional rental income from a second home. This step minimises tax pressures, promotes homeownership, and facilitates real estate investment, especially in second homes and Tier 2 and 3 cities."

"Middle-class homebuyers, landlords, and investors can now benefit from reduced tax liabilities, better affordability, and fewer compliance hassles. By simplifying financial constraints and tax rules, the budget has made property ownership and rental housing more accessible. This gives a significant fillip to the real estate sector, specifically to and housing demand," he added.
 
Comments
setushankar1957
2 weeks ago
Basu Da you have explained the situation rather well for even a retired fauji to hoist the crux. Grateful Dada
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