Budget 2025 Income Tax Slab: Tax Slab under New Regime for AY 2025-26; Check All Details Here!

The Budget 2025 is set to introduce significant changes to the income tax slabs, particularly benefiting the middle class. 

Currently, the new tax regime features slabs where income up to ₹3 lakh is tax-free, while earnings between ₹3 lakh and ₹7 lakh are taxed at 5%. 

The rates continue to increase, reaching 30% for income exceeding ₹15 lakh. In contrast, the old tax regime allows for various deductions and exemptions, making it more complex but potentially advantageous for some taxpayers.

This article will discuss the anticipated changes in the tax slabs under both regimes. We will explore how these adjustments aim to ease the financial burden on middle-class taxpayers and enhance their disposable income.

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New Tax Regime: Latest Income Tax Slab (FY 2025–26)

The latest income tax slabs under the New Tax Regime for FY 2025–26 feature revised brackets designed to reduce the tax burden on middle-income earners. Here's a simplified breakdown:

Key highlights:

• No income tax on income up to ₹12 lakh.
• Salaried taxpayers with income up to ₹12.75 lakh will have no tax liability.
• Under the new tax regime, income up to ₹4 lakh is tax-free.
• Personal income tax reforms aimed at benefiting the middle class.
• TDS on rent threshold increased from ₹2.4 lakh to ₹6 lakh annually.
• Senior citizens' tax deduction limit doubled to ₹1 lakh.

1) Start-ups

• Tax benefits for start-ups to continue for five years from inception.

2) Banking & Insurance

• A Grameen Credit Score Framework will be introduced for rural India.
• FDI limit in the insurance sector to be increased to 100%.

3) Housing

• ₹15,000 crore fund allocated to expedite the completion of one lakh housing units.

4) Agriculture & Farmers

• Six-year mission to achieve self-sufficiency in oilseed production.
• Five-year mission to improve cotton yield and quality.
• Kisan Credit Card loan limit raised from ₹3 lakh to ₹5 lakh.

5) Education

• Atal Tinkering Labs to be established in schools.
• Broadband internet to be provided to government secondary schools.
• Infrastructure expansion in IITs to accommodate more students, with a specific focus on IIT Patna.

6) Healthcare

• Daycare cancer centres to be set up in all district hospitals, with 200 centres planned for fiscal 2026.
• Six life-saving drugs to be subject to a 5% duty.
• 36 life-saving drugs for cancer and chronic diseases to be exempted from basic customs duty.

7) Economic Growth & MSMEs

• Credit guarantee coverage for MSMEs to be increased from ₹5 crore to ₹10 crore.

8) Infrastructure

• Three-year projects to be implemented under PPP mode.
• ₹1.5 lakh crore interest-free loans for states to fund infrastructure reforms.
• Over 100 new regional airports to be developed over the next 10 years.
• UDAN 2.0 to connect 120 new airports, with a focus on Northeast and Bihar.

9) Excise & Customs Duty

• Export promotion mission to ensure easier access to export credit.
• Removal of seven tariff rates, leaving only eight rates in place.

10) Economy

• Investment-friendly index to be introduced to boost competition among states.
• Revised fiscal deficit for FY 2025 set at 4.8%.
• Capital expenditure to reach ₹10.18 lakh crore.

11) Women's Development

• ₹2 crore term loan for women and first-time entrepreneurs from SC/ST and backward classes.

12) Rural India

• Nutritional support for over 8 crore children and 1 crore lactating mothers.

13) Make in India & Technology

• National Manufacturing Mission to provide policy support and monitoring.
• New clean technology manufacturing mission to be launched.
• Nuclear Energy Mission to boost R&D efforts.
• Jal Jeevan Mission extended until 2028.
• Centre of Excellence in AI to be set up with an allocation of ₹500 crore.
• 25 additional capital goods to support EV battery manufacturing.

14) Tourism

• Visa fee waivers for selected tourist groups.
• Special focus on destinations linked to Lord Buddha.

Direct and Indirect Taxes

Key changes:

• Tax-free limit doubled from ₹7 lakh to ₹12 lakh annually
• Simplified tax structure with ₹1 lakh crore revenue foregone in direct taxes
• Removed 7 custom duty rates for industrial goods, leaving only 8 tariff tiers

Indirect Taxes

GST Rates (2025):

• Slabs remain unchanged at 0%, 5%, 12%, 18%, and 28%

Customs Duty Reforms:

• 36 life-saving medicines exempted from basic customs duty (cancer/rare disease treatments)
• EV manufacturing boost: 35 capital goods for lithium-ion battery production made duty-free
• Reduced duties on:
  • Cobalt powder (25% → 5%)
  • Lithium-ion battery scrap (5% → 2.5%)
  • Critical minerals for domestic production

Export Promotion Measures:

• Extended export timelines for handicrafts (6 → 12+3 months)
• Duty reduction on frozen fish paste (30% → 5%) and fish hydrolysate (15% → 5%)
• Exemptions for leather processing inputs to boost employment

Procedural Improvements:

• Fixed timelines for provisional customs assessments
• Voluntary compliance measures for trade facilitation

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