As the new financial year commences on April 1, 2025, several significant income tax changes have officially come into effect, directly impacting salaried individuals, senior citizens, investors, and taxpayers across the country. Announced during Budget 2025, these updates aim to simplify compliance, improve transparency, and provide substantial relief to the middle class. From revised tax slabs to increased deduction limits and changes in TDS thresholds, here’s a complete breakdown of what taxpayers need to know.
 

New Income Tax Slabs for FY 2025-26

Under the new tax regime, the government has introduced a revamped structure to ensure progressive taxation while offering relief to middle-income earners. As per the latest tax slabs applicable for the assessment year 2026–27:

• Income up to ₹4 lakh: Nil tax

• Income from ₹4,00,001 to ₹8 lakh: 5%

• Income from ₹8,00,001 to ₹12 lakh: 10%

• Income from ₹12,00,001 to ₹16 lakh: 15%

• Income from ₹16,00,001 to ₹20 lakh: 20%

• Income from ₹20,00,001 to ₹24 lakh: 25%

• Income above ₹24 lakh: 30%

This new slab structure provides immediate tax relief for those in the lower and middle-income brackets and brings greater parity in tax liabilities across income groups.
 

Zero Tax on Income up to ₹12 Lakh Under New Regime

One of the most welcomed changes is the effective zero tax liability on income up to ₹12 lakh. Individuals who opt for the new tax regime will be eligible for full tax exemption under Section 87A if their income doesn’t exceed ₹12 lakh. However, to avail of this benefit, taxpayers must file their Income Tax Return (ITR) as per regulations. Additionally, salaried individuals can now claim an enhanced standard deduction of ₹75,000, up from ₹50,000 previously. This means that effective tax-free income can go up to ₹12.75 lakh when the deduction is factored in. A marginal relief provision has also been introduced to ensure that taxpayers earning just slightly above ₹12 lakh do not face disproportionate tax burdens. They will only be taxed on the excess amount above ₹12 lakh. According to Ajay Lakhotia, Founder and CEO of StockGro, “Starting April 1, the Finance Act 2025 is transforming India’s tax framework, providing significant relief and simpler compliance for millions. By making annual incomes up to ₹12 lakh tax-free, it boosts middle-class purchasing power, encouraging savings and broader consumer spending.”
 

Higher TDS and TCS Thresholds Introduced

In a move to ease liquidity pressures and reduce compliance burdens, the government has raised the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) thresholds across various categories:

• For senior citizens, the TDS threshold on bank interest income has been doubled from ₹50,000 to ₹1 lakh.

• For all other individuals, the TDS threshold on interest income has been increased to ₹50,000.

• Dividend income now enjoys a revised TDS threshold of ₹10,000, up from ₹5,000 earlier.

• TCS on overseas remittances has been increased to ₹10 lakh, up from the previous ₹7 lakh limit.

These changes are expected to enhance disposable income, especially for retirees and investors relying on interest and dividend-based returns.

Lakhotia further added, “Senior citizens benefit significantly from the revised TDS threshold on bank deposits, which allows them to retain more income without triggering TDS. Investors, too, gain from higher limits on dividend incomes.”
 

Simplified Tax Filing for Self-Occupied Properties

Another notable reform aimed at easing the tax filing process is the simplification in calculating the annual value of self-occupied homes. Taxpayers can now declare the annual value of up to two self-occupied properties as zero, eliminating the need for complex valuation exercises and reducing the paperwork involved during income tax return filing. This change benefits families owning multiple homes and avoids notional taxation on properties that do not generate rental income.
 

The overarching goal of the Budget 2025 tax amendments is to create a more equitable and taxpayer-friendly environment. By reducing tax rates, increasing deductions, and simplifying compliance mechanisms, the government is aiming to:

• Increase the purchasing power of the middle class

• Boost formal compliance by making the process simpler

• Encourage savings and investments

• Strengthen the overall tax ecosystem with digital integration

Taxpayers are advised to carefully evaluate whether the old or new tax regime suits them best, especially considering the changes in standard deductions and exemptions. Filing ITR within deadlines remains critical to availing of the tax-free benefits under Section 87A. With these reforms now active from April 1, 2025, staying informed and proactive in financial planning will help individuals maximize savings and avoid any compliance penalties in the new financial year.