Income Tax Relief 2025-26: No Tax up to ₹12 Lakh & What the New Slabs Mean

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Income Tax 2025-26: What You Must Know About the New Tax Slabs & Reliefs

In the Union Budget 2025-26, the Indian government introduced major changes in income tax rates, slabs, and rebates. For salaried individuals and other taxpayers, these updates bring significant relief—especially to the middle class. If you haven’t caught up yet, here’s everything you need to know + what actions to take.

Key Changes Announced (Effective from April 1, 2025)

  1. New Tax Slabs under the New Tax Regime

  2. Zero Income Tax for Incomes up to ₹12 Lakh
    Via increase in rebate under Section 87A, individuals with a taxable income up to ₹12,00,000 will have no tax liability under the new regime. For salaried individuals, when the standard deduction (₹75,000) is included, this amount effectively becomes ₹12,75,000. The Economic Times+3mint+3ClearTax+3

  3. Higher Rebate Under Section 87A
    The rebate limit has been raised to ₹60,000 under the new regime, which enables the zero-tax benefit for the eligible income group. ClearTax+2ClearTax+2

  4. TDS & Threshold Changes

    • Various thresholds for TDS have been increased to reduce small deduction hassles. ClearTax+1

    • For senior citizens, the interest income threshold before TDS applies has gone up. ClearTax

Who Benefits Most & Who Should Recalculate

  • Middle-class & Salaried Taxpayers: If your income is under or near ₹12 lakh (or slightly more in your case after deductions), you get major relief. More take-home pay, lower tax burden.

  • People with incomes slightly above ₹12 lakh: Savings are still there but smaller. You’ll need to run numbers under both the new vs old regime to decide what works best.

  • Tax-savvy Individuals: Those using deductions (for investments, savings, home-loan interest, etc.) should still consider whether staying in the old regime gives more benefit, depending on their expense/deduction profile.

Important Things to Note / Caveats

  • The zero tax upto ₹12 lakh is under the new tax regime. Old regime still exists for people who prefer it or who get more benefit from deductions. The Times of India+1

  • Income from special rates (capital gains, winnings, etc.) often isn’t covered by rebate benefits or might have different rates/conditions. ClearTax+1

  • The standard deduction (₹75,000) still plays a role, especially for salaried individuals. Business Today+1

  • The tax liability threshold, surcharge and other add-ons (like health & education cess) still apply. The Economic Times+1

What You Should Do Going Forward

  1. Re-compute Tax Liabilities
    Use updated slabs + rebate to re-estimate your tax. Compare old vs new regime. See which gives you lower tax.

  2. Update Payroll / Salary Structures
    If you are an employer, ensure payroll deductions reflect the new rules. Employees must be informed.

  3. Plan Deductions & Investments
    Under the old regime, deductions like under Section 80C, housing loan interest, etc. still matter. If you prefer old regime, maximize them.

  4. File Returns Carefully
    The taxpayer must choose which regime they are opting for (new or old) when filing. Once chosen, cannot switch mid-year.

  5. Stay Updated
    Keep an eye on notifications from CBDT (Central Board of Direct Taxes) because there may be clarifications, especially about threshold limits, special incomes, or deductions.

Why These Changes Matter

  • They put more money in the hands of taxpayers, especially the middle class.

  • Likely to boost consumption & savings, helping the larger economy.

  • Simplifies tax compliance for many (fewer bracket jumps, more predictability).

📊 Quick Summary Table

Income (New Regime)Tax RateEffective after Rebate if Eligible
Up to ₹12,00,0000-30% (depending on slab)Zero tax payable (if income ≤ ₹12L & standard deduction)
₹12,00,001-₹24,00,00015-25% etc.Partial tax, rebate not fully usable
Above ₹24,00,00030%Taxes apply fully; surcharge etc. still relevant

M A Ashraf & Co. – Chartered Accountants
Specialising in GST, Income Tax, and Startup Advisory
📍 Serving PAN India | 💼 camdayazashraf.blogspot.com

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