Glimpse of Finance Budget 2025
- Asthik
- Feb 1
- 4 min read
Updated: Feb 25
Finance Minister Nirmala Sitharaman presented the Union Budget 2025, introducing significant direct tax reforms aimed at simplification, tax relief, and investment growth. The budget brings new tax slabs, surcharge reductions, and TDS rationalization, benefiting both individual taxpayers and businesses.
New Income Tax Slabs F.Y 2025-26
The government has revised tax slabs under the new regime (default option) to ease the tax burden:
Total Income (₹) | Tax Rate (%) |
|---|---|
Up to ₹4,00,000 | Nil |
₹4,00,001 – ₹8,00,000 | 5% |
₹8,00,001 – ₹12,00,000 | 10% |
₹12,00,001 – ₹16,00,000 | 15% |
₹16,00,001 – ₹20,00,000 | 20% |
₹20,00,001 – ₹24,00,000 | 25% |
Above ₹24,00,000 | 30% |
Note: There are no changes in Old Tax Regime Rates.
Key Takeaways:
Basic Exemption limit increased to ₹4 lakh (earlier ₹3 lakh).
Rebate under Section 87A raised:
FY 2024-25: No tax for a person having a income upto ₹7 lakhs*
FY 2025-26: No tax for a person having a income upto ₹12 lakhs*
* If the income is above the limits mentioned, then rebate benefit cannot be availed by such Individual. Rebate would not be available for Capital Gain Income (Profits from sale of Shares and Mutual Funds)
Note: Rebate is not available if Income is above 12 Lakhs (Refer Old Rates here)
Let us look at some examples on Tax Computation based on different Incomes of Individuals (excluding capital gains income)
Please note that there is Marginal Relief available if the Income total to Rs. 12,75,000, where the Tax liability will Zero.
Scenario 1: Annual Income of ₹12,00,000
For an individual with a total income of ₹12,00,000, the tax calculation under the new regime is as follows:
Income up to ₹4,00,000: No tax
Income from ₹4,00,001 to ₹8,00,000: 5% of ₹4,00,000 = ₹20,000
Income from ₹8,00,001 to ₹12,00,000: 10% of ₹4,00,000 = ₹40,000
Total Tax Payable (Excluding Cess @ 4%): ₹20,000 + ₹40,000 = ₹60,000
However, as per the latest provisions, individuals with an annual income up to ₹12,00,000 are eligible for a rebate under Section 87A (tax amount of ₹60,000), making their effective tax liability zero.
Refer following article to understand Rebate Provisions.
Scenario 2: Annual Income of ₹24,00,000
For an individual with a total income of ₹24,00,000, the tax calculation is as follows:
Income up to ₹4,00,000: No tax
Income from ₹4,00,001 to ₹8,00,000: 5% of ₹4,00,000 = ₹20,000
Income from ₹8,00,001 to ₹12,00,000: 10% of ₹4,00,000 = ₹40,000
Income from ₹12,00,001 to ₹16,00,000: 15% of ₹4,00,000 = ₹60,000
Income from ₹16,00,001 to ₹20,00,000: 20% of ₹4,00,000 = ₹80,000
Income from ₹20,00,001 to ₹24,00,000: 25% of ₹4,00,000 = ₹1,00,000
Total Tax Payable (Excluding Cess @ 4%): ₹20,000 + ₹40,000 + ₹60,000 + ₹80,000 + ₹1,00,000 = ₹3,00,000
In this scenario, the individual is not eligible for the rebate under Section 87A, and thus the total tax payable is ₹3,00,000 (excl. cess @ 4%)
Scenario 3: Annual Income of ₹30,00,000
For an individual with a total income of ₹30,00,000, the tax calculation is as follows:
Income up to ₹4,00,000: No tax
Income from ₹4,00,001 to ₹8,00,000: 5% of ₹4,00,000 = ₹20,000
Income from ₹8,00,001 to ₹12,00,000: 10% of ₹4,00,000 = ₹40,000
Income from ₹12,00,001 to ₹16,00,000: 15% of ₹4,00,000 = ₹60,000
Income from ₹16,00,001 to ₹20,00,000: 20% of ₹4,00,000 = ₹80,000
Income from ₹20,00,001 to ₹24,00,000: 25% of ₹4,00,000 = ₹1,00,000
Income from ₹24,00,001 to ₹30,00,000: 30% of ₹6,00,000 = ₹1,80,000
Total Tax Payable (Excluding Cess at 4%): ₹20,000 + ₹40,000 + ₹60,000 + ₹80,000 + ₹1,00,000 + ₹1,80,000 = ₹4,80,000
In this scenario, the individual is not eligible for the rebate under Section 87A, and thus the total tax payable is ₹4,80,000 (excl. cess @ 4%)
These examples demonstrate how the revised tax slabs and rebates in the Finance Budget 2025 can significantly impact taxpayers across different income levels.
Surcharge capped at 25% for high-income earners (Above ₹5 crore)
Additonal Benefit to Salaried Employees: Salaried Employees can claim a Standard deduction upto Rs. 75,000 (previously which was Rs. 50,000) under this scheme. Therefore, we can say that, for a Salaried employee having Salary income totaling to Rs. 12,75,000, there would be no Tax Payable.
Tax Relief & TDS Adjustments
TDS on insurance commission (Section 194H) reduced from 5% to 2%
Higher TDS thresholds for various payments:
Dividend (Section 194): Threshold Limit from ₹5,000 → ₹10,000
Interest on bank deposits (Section 194A): ₹40,000 → ₹50,000 (₹1 lakh for senior citizens)
Rent (Section 194I): ₹2,40,000 per year → ₹6,00,000 per month
Fees for Professional or Technical Services (Section 194J): Threshold Limit from ₹30,000 → ₹50,000 in single payment
Fees for Commission or Brokerage (Section 194H): Threshold Limit from ₹15,000 → ₹20,000 (effective from April 1, 2025)
TDS on lottery winnings & horse racing (194B & 194BB) now applies for single transaction, not cumulative, ₹10,000 per year.
Disclaimer: The above provisions are just a breif summary of Finance Act, 2024. Income tax Bill is going to be introduced in a week's time by Finance Minister which is proposed to bring significant changes in Income Tax Act.
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