Major Tax Changes for FY 2025-26: Know How New Rules Will Benefit You
As we are entering the new financial year 2025-26, some major tax reforms are coming into play that can make a big difference in your income. Salaried individuals or property owners are the community of taxpayers that will be significantly influenced by these reforms. Here’s a breakdown of the key tax changes in simpler terms:
- Tax-Free Income Up to Rs. 12.75 Lakh
Salaried individuals who have opted for the new tax regime and earn a salary upto Rs. 12.75 lakh per year or below are not required to pay any tax on it. The new tax regime is also offering a higher standard deduction in addition to a rebate.
- Revised Income Tax Slabs (2025)
The Ministry of Finance has introduced some new income tax slabs. Below are the new tax rates for the salaried individuals:
- Rs. 0 – Rs. 4 Lakh: No tax
- Rs. 4 – Rs. 8 Lakh: 5% tax
- Rs. 8 – Rs. 12 Lakh: 10% tax
- Rs. 12 – Rs. 16 Lakh: 15% tax
- Rs. 16 – Rs. 20 Lakh: 20% tax
- Rs. 20 – Rs. 24 Lakh: 25% tax
- Above Rs. 24 Lakh: 30% tax
These changes have been developed to reduce the tax burden for more of the taxpayers, with the first Rs. 4 lakh being completely tax-free.
- Big Increase in Tax Rebate (Section 87A)
A major change has been introduced in the tax rebate under Section 87A. The rebate has increased from Rs. 25,000 to Rs. 60,000. Meaning, individuals, especially the middle class, will benefit more from this relief under the new tax regime.
- More Time to Fix Your Tax Return
The Ministry of Finance had extended the time limit to furnish an updated income tax return. If you have made a mistake in your tax return or forgotten to report some income/misreported your income. Now you have time upto 48 months (4 years) to file an updated Income Tax Return. Earlier, this limit was for 24 months, giving you more time to correct any errors.
- Perks for Property Owners
If you also own one or two self-occupied homes, you can now declare your tax on these homes as NIL, i.e., zero. This reduces the notional income you would otherwise have to report, lowering your overall tax liability.
- Higher TDS & TCS Thresholds
The government has also introduced changes in the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) thresholds.
- The limit on TDS for rent has increased from Rs. 2.4 lakh to Rs. 6 lakh, meaning more people can earn higher rental income without TDS being deducted.
- The limit on TDS for foreign remittances has been raised to Rs. 10 lakh, making it easier for individuals to send money overseas without getting hit with extra tax deductions.
- Better Tax-Free Perks for Employees
The thresholds on some tax-free benefits (perquisites) have increased for employees. For instance, Employees can now claim up to Rs. 8 lakh tax-free for medical expenses incurred abroad. The definition of a “specified employee” has been expanded, meaning more people can now take advantage of these tax-free perks.
- Changes to Digital Ad Tax
India is thinking of scrapping the 6% digital ad tax (known as the equalisation levy) on global tech companies such as Google and Meta. This will affect how online ads and digital businesses are taxed, possibly leading to changes in how online advertising costs are structured.
- UPI, Bank Accounts & Financial Rules
Some significant new updates have been introduced in UPI rules, bank accounts, and financial regulations:
New rules are coming for UPI transactions to make them easier and safer. The minimum balance requirements in some bank accounts might be relaxed. The aim is to make everyday banking and financial transactions more user-friendly.
Final Thoughts
These tax changes in 2025 aim to reduce the tax burden on middle-income people, simplify the process of filing taxes, and make it easier to handle your finances. Whether you’re earning a salary, renting out property, or just trying to navigate new banking rules, these reforms should help make your life a little easier.
