Revised Income Tax Slabs: How much money will you save in the new regime post Budget 2025? Here’s the math | Mint

Budget 2025 Income Tax Changes: Finance Minister Nirmala Sitharaman proposed sweeping tax reforms for the middle class in the Budget 2025. From zero tax on income of up to ₹12 lakh to cutting the income tax rates proposed in the new tax regime, Budget 2025 came as a much needed relief for the taxpayers.

In what’s being dubbed as ‘dream budget’ for middle class, here’s a breakdown of the numbers and income tax calculations to understand the impact.

Taxpayers with a normal income (excluding special rate income like capital gains) of up to ₹12 lakh will have no tax liability due to a rebate and reduced slab rates. Those earning ₹12 lakh will receive a tax benefit of ₹80,000, which covers 100% of their tax payable under existing rates. For an income of ₹18 lakh, the benefit is ₹70,000, covering 30% of the tax payable. Similarly, a person earning ₹25 lakh will get a benefit of ₹1,10,000, which accounts for 25% of their tax liability under the current rates.

Section 87A rebate

Under the Budget 2025 proposal, effective from AY 2026-27, Section 87A has been revised for resident individuals under the default tax regime, increasing the rebate limit from ₹7 lakh to ₹12 lakh and the maximum rebate from ₹25,000 to ₹60,000. However, the rebate will not apply to income taxed at special rates if the individual stays in the default tax regime.

“Due to the revised tax slab rates and changes in the Section 87A rebate, an assessee who does not opt out of the default tax regime always remains in a favourable position, even when deductions under Sections 80C, 80D and 24 (b) are claimed under the normal tax regime. Under Budget 2025, the Section 87A rebate will no longer apply to income taxed at special rates. As a result, taxpayers with special rate income will not be eligible for the rebate benefit under Section 87A,” CA Shivam Gupta, Assistant Manager at Taxmann told Livemint.

Other tax reliefs

Threshold for TDS and TCS increased: Finance Minister Nirmala Sitharaman proposed to increase in the threshold for Tax Deduction at Source (TDS) on rent from Rs2.40 lakh per annum to Rs6 lakh per annum in her Budget 2025 speech. This effectively raises the monthly limit for TDS deduction on rent from Rs20,000 to Rs50,000, benefiting small taxpayers and easing compliance burdens.

Relief for Senior citizens: The finance minister has proposed to double the limit for tax deduction on interest for senior citizens from the present ₹50,000 to ₹1,00,000.

TCS on remittances: Tax Collected at Source (TCS) on remittances under the RBI’s Liberalized Remittance Scheme (LRS) has been increased from to Rs10 lakh from Rs7 lakh, and TCS on remittances for education purposes, where the remittance is out of a loan from a financial institution, has been removed.