Budget 2025 Highlights —
Rs 12 Lakh Zero Tax
The Union Budget 2025-26 income-tax changes: revised new-regime slabs, the enhanced Section 87A rebate that makes income up to Rs 12 lakh tax-free, the Rs 75,000 standard deduction, higher TDS thresholds and the longer ITR-U window.
The Union Budget 2025-26 (presented 1 February 2025, effective FY 2025-26) made income up to Rs 12 lakh tax-free under the new regime by raising the Section 87A rebate to Rs 60,000. For salaried taxpayers the effective zero-tax limit is Rs 12.75 lakh after the Rs 75,000 standard deduction. The new-regime slabs were widened, several TDS thresholds were raised, and the ITR-U (updated return) window was extended to 48 months. The old regime slabs are unchanged.
The Rs 12 lakh zero-tax relief, the widened slabs and the Rs 75,000 standard deduction apply to the default new regime. The old regime slabs, its Rs 50,000 standard deduction and its Rs 5 lakh 87A rebate were left unchanged — Budget 2025 nudges taxpayers toward the new regime.
New Income Tax Slabs — FY 2025-26
Budget 2025 replaced the earlier six-slab new-regime structure (0-3L nil, 3-6L 5%, 6-9L 10%, 9-12L 15%, 12-15L 20%, 15L+ 30%) with wider bands and a lower entry rate. See the full income-tax slabs for both regimes.
| Income slab | New regime (FY 2025-26) | Old regime (unchanged) |
|---|---|---|
| Up to Rs 4 lakh | Nil | Nil to Rs 2.5L |
| Rs 4L – Rs 8L | 5% | 5% (Rs 2.5L–5L) |
| Rs 8L – Rs 12L | 10% | 20% (Rs 5L–10L) |
| Rs 12L – Rs 16L | 15% | 30% (above Rs 10L) |
| Rs 16L – Rs 20L | 20% | 30% |
| Rs 20L – Rs 24L | 25% | 30% |
| Above Rs 24 lakh | 30% | 30% |
| Standard deduction (salaried) | Rs 75,000 | Rs 50,000 |
New-regime slabs effective 1 April 2025 (FY 2025-26 / AY 2026-27). Old-regime slabs and its Rs 50,000 standard deduction were not changed by Budget 2025.
Rs 12 Lakh Tax-Free — The Section 87A Math
The new-regime slabs still compute tax on Rs 12 lakh — the Section 87A rebate of up to Rs 60,000 then wipes out exactly that liability, so net tax is nil. Salaried taxpayers reach Rs 12 lakh taxable after a Rs 75,000 standard deduction, i.e. a gross salary of Rs 12.75 lakh.
Rs 12,00,000 income — new regime
Rs 12,75,000 salary — new regime
The Rs 60,000 rebate applies only up to Rs 12 lakh taxable income. Cross it by even Rs 1 and the rebate is lost, though marginal relief caps the extra tax so your take-home never falls below Rs 12 lakh. Special-rate income (such as capital gains) is taxed at its own rate and does not get the 87A rebate.
Not sure whether the new regime beats the old one for you?
Compare regimes →TDS Threshold Hikes in Budget 2025
Budget 2025 raised several TDS thresholds from 1 April 2025 to cut the compliance load on small landlords, senior citizens and retail investors. Full rates are in our TDS rate chart.
| Section | Nature | Old threshold | New (FY 2025-26) |
|---|---|---|---|
| 194-I | Rent | Rs 2,40,000/yr | Rs 6,00,000/yr |
| 194A | Interest — senior citizens | Rs 50,000/yr | Rs 1,00,000/yr |
| 194A | Interest — others (bank) | Rs 40,000/yr | Rs 50,000/yr |
| 194 | Dividends | Rs 5,000/yr | Rs 10,000/yr |
| 194LA | Compensation on land acquisition | Rs 2,50,000/yr | Rs 5,00,000/yr |
Higher thresholds mean fewer small taxpayers face TDS on passive income and fewer refund claims. Verify section-wise limits at incometax.gov.in before deducting.
Other Key Budget 2025 Changes
- ITR-U window doubled: the time limit to file an updated return under Section 139(8A) was extended from 24 months to 48 months from the end of the relevant assessment year (additional tax rises to 60%/70% for the later years).
- Standard deduction: retained at Rs 75,000 in the new regime (Rs 50,000 in the old regime).
- Capital gains: no change from the July 2024 rates — LTCG on listed equity/units 12.5% above Rs 1.25 lakh, STCG 20%.
- Old regime: slabs, the Rs 50,000 standard deduction and the Rs 12,500 / Rs 5 lakh 87A rebate all unchanged.
- MSME & startups: enhanced credit-guarantee cover and continued support — see Udyam registration for MSME benefits.
New regime likely wins if
- Your income is up to Rs 12.75 lakh (salaried) — zero tax
- You claim few deductions beyond the standard deduction
- You want the simplest filing with no proofs to keep
Old regime may still win if
- You have large 80C, 80D and home-loan interest claims
- You pay home-loan interest under Section 24(b)
- Your total deductions comfortably exceed the slab benefit
Want a CA to run both regimes and file your return correctly?
Get ITR Filing Help →Budget 2025 — Frequently Asked Questions
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