In the Union Budget for the fiscal year 2025-26, the Indian government introduced significant changes to the income tax structure, aiming to provide relief to taxpayers and stimulate economic growth. These modifications are designed to increase disposable income, encourage consumer spending, and simplify the tax system.
Revised Income Tax Slabs for FY 2025-26 (AY 2026-27):
The new tax regime has restructured the income tax slabs as follows:
| Income Range | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Key Features of the New Tax Regime
- Increased Standard Deduction: The standard deduction for salaried individuals has been increased from ₹50,000 to ₹75,000. This enhancement allows taxpayers to reduce their taxable income further, providing additional financial relief.
- Enhanced Tax Rebate under Section 87A: The tax rebate limit under Section 87A has been raised, ensuring that individuals with taxable income up to ₹7,00,000 are eligible for a rebate, effectively reducing their tax liability to zero. This move significantly benefits low and middle-income earners.
- Simplification and Transparency: The revised tax slabs aim to simplify the tax system, making it more transparent and easier for taxpayers to understand their obligations. This simplification is expected to improve compliance and reduce instances of tax avoidance.
Implications for Different Income Groups:
- Low-Income Earners: With the tax-free threshold set at ₹3,00,000 and the enhanced rebate under Section 87A, individuals in this bracket will experience minimal to no tax liability, allowing them to allocate more funds towards essential needs and savings.
- Middle-Income Earners: The combination of increased standard deduction and progressive tax rates provides substantial relief to middle-income individuals, resulting in higher disposable income and greater financial flexibility.
- High-Income Earners: While the tax rates for higher income brackets remain significant, the structured progression ensures a fair contribution without imposing an excessive burden, maintaining equity within the tax system.
The Union Budget 2025-26 introduces a more progressive and simplified income tax structure, reflecting the government’s commitment to equitable economic growth and taxpayer welfare. Taxpayers are encouraged to assess these changes carefully and consider their financial planning strategies to maximize the benefits under the new regime.
