As India unveils its financial roadmap for the upcoming year with Budget 2025, the Finance Minister has proposed key changes and taken strategic initiatives for individual taxpayers with a special focus on the middle class. This budget aims to provide more disposable income for the taxpayers in order to boost household consumption, savings, and investment.
Here’s an analysis of the proposed amendments to tax rates in the new tax regime in India:
Tax rate | Present income slab (in INR) | Proposed income slab (in INR) |
0% | Up to 3 lakh | Up to 4 lakh |
5% | 3 to 7 lakh | 4 to 8 lakh |
10% | 7 to 10 lakh | 8 to 12 lakh |
15% | 10 to 12 lakh | 12 to 16 lakh |
20% | 12 to 15 lakh | 16 to 20 lakh |
25% | - | 20 to 24 lakh |
30% | Above 15 lakh | Above 24 lakh |
The revised tax structure in India provides:
Enhanced Rebate to Exempt Income up to INR 12 Lakh – the Big Rax Relief!
In Budget 2025, the rebate under section 87A of the Income-tax Act, 1961 (the Act) was amended in the previous Budget (announced in July 2024) to provide relief to resident individuals for income up to INR 7 lakh under the NTR. The Finance Bill proposes to enhance the income limit to INR 12 lakh.
This is clearly a significant relief for taxpayers as any income up to INR 12 lakh (excluding capital gain) will not incur tax liability.For instance, an individual earning income of INR 12 lakh will see the following proposed tax liability (excluding surcharge and cess):
Particulars | Amounts (in INR) | Amounts (in INR) | Amounts (in INR) |
Taxable income (excluding capital gain) | 12,00,000 | 12,70,588 | 13,00,000 |
Proposed tax: Up to 4 lakh: Nil 4 to 8 lakh: INR 20,000 8 to 12 lakh: INR 40,000 Above 12 lakh: @ 15% |
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|
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Total tax liability | 60,000 | 70,588 | 75,000 |
Rebate | 60,000 | 70,588 | Nil |
Net tax liability under NTR | Nil | Nil | 75,000 |
The break-even income limit for marginal relief would be INR 70,588 under the NTR.
Surcharge and Education Cess to Remain Unchanged
As the basic tax rate structure has been revised, no further changes have been proposed to the surcharge and higher secondary and education cess, which will remain the same.
Rationalisation of TDS/ TCS Provisions
The Finance Bill not only introduces revised tax NTR rates but also proposes a rationalisation of Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) provisions for individual taxpayers. These proposed amendments primarily focus on adjusting the income and expenditure thresholds for TDS applicability.
The above measures proposed in the Finance Bill 2025 are expected to significantly reduce the tax burden on middle-class taxpayers and enhance their disposable income. The Finance Minister also announced that the new Income-tax Bill will be introduced in the upcoming week. While the proposed tax structure is expected to remain largely unchanged for a year, a simplified law under the new tax regime will undoubtedly bring greater clarity and certainty and encourage increased compliance from taxpayers.
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