New Income Tax Slab Updates for 2025-26
The proposed income tax slabs and rates for the 2025-26 financial year indicate significant benefits for salaried employees and senior citizens. According to experts, Finance Minister Nirmala Sitharaman has addressed middle-class concerns by making income up to ₹12 lakh exempt from tax. Additionally, there is a proposed increase in the TDS limit for senior citizens, enhancing the appeal of bank and post office deposits.
Marginal Relief Details
Under the new tax regime, marginal relief will be available for resident individuals whose income slightly exceeds ₹12 lakh. For instance, an individual earning ₹12.1 lakh would typically face a tax burden, but with the application of marginal relief, their tax liability would be reduced to ₹10,000. The Central Board of Direct Taxes (CBDT) states that this relief applies to total incomes approaching ₹12.75 lakh.
Upcoming Income Tax Bill
Finance Minister Nirmala Sitharaman announced that a new Income Tax bill will be introduced next week, designed to simplify the current tax laws by reducing their complexity by nearly half. This new legislation aims to maintain the principles of fairness and transparency, ensuring ease of understanding for taxpayers and reducing disputes related to tax administration.
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Key Features of the New Income Tax Regime
In her recent budget presentation, Sitharaman outlined a historic change: individuals earning up to ₹12 lakh will no longer be required to pay income tax. Taxpayers can choose between the old and new tax regimes. The old regime allows for various exemptions on expenses like housing rentals and insurance, while the new regime offers lower rates but without exemptions.
Proposed Tax Structure
The revised income tax structure under the new regime is as follows:
| Income Slab (₹) | Tax Rate (%) |
|---|---|
| 0 – 4 lakh | Nil |
| 4 – 8 lakh | 5 |
| 8 – 12 lakh | 10 |
| 12 – 16 lakh | 15 |
| 16 – 20 lakh | 20 |
| 20 – 24 lakh | 25 |
| Above 24 lakh | 30 |
With these changes, taxpayers with annual incomes up to ₹12 lakh will not incur any tax liability.
Increased Tax Rebate
The government has also raised the income tax rebate threshold from ₹7 lakh to ₹12 lakh, aimed at alleviating the tax burden on individuals earning approximately ₹1 lakh per month. During a media session, Sitharaman explained that this adjustment aligns with the government’s view that such earners should not face taxation.
FAQs
1. What is the new income tax exemption limit for FY 2025-26?
The new exemption limit has been raised to ₹12 lakh, meaning individuals with this income or less will not have to pay any income tax.
2. How does marginal relief work under the new tax regime?
Marginal relief is available for those whose income is slightly above ₹12 lakh, allowing them to pay reduced taxes compared to what they would owe without this relief.
3. Can taxpayers choose between old and new tax regimes?
Yes, taxpayers have the option to select either the old or new tax regime at the beginning of each financial year.
4. What are the key features of the proposed new income tax bill?
The upcoming bill aims to simplify existing laws significantly while promoting clarity and reducing litigation in tax matters.
5. How will these changes affect senior citizens?
The proposed changes include an increase in TDS limits for senior citizens, making savings instruments like bank deposits more attractive for them.