Your Budget 2025 Guide: Income tax slabs, rates, and key benefits. All your queries answered | Mint

Your Budget 2025 Guide: Under the new income tax slabs, income up to ₹12 lakh will now be tax-free. Previously, income up to ₹15 lakh was taxed between 5% and 20%, with anything above ₹15 lakh taxed at 30%. The government released FAQs to clarify these changes, focusing on the new income tax structure and benefits for taxpayers.

The income tax reforms introduced in the budget are among the biggest in the last decade — simplified and rationalized to put more money in people’s hands without compromising the fiscal deficit.

“The most important change has been the revision of the tax slabs to keep in line with inflation. This has been a long-standing request of the taxpayers for many years. In the updated tax reforms, with slabs adjusted for inflation, the 30% tax rate is now applicable above ₹24 lakh, up from the initial ₹15 lakh. This change in the 30% slab marks a 60% adjustment. Under the proposed 2025 tax regime, someone earning ₹25 lakh annually will pay ₹3.43 lakh in total tax, compared to ₹4.57 lakh under the 2024 regime. This translates to 5% more money in hand and a monthly saving of around ₹9,500 — a substantial relief for taxpayers,” said Adhil Shetty, CEO, BankBazaar.com

Here are the frequently asked questions (FAQs) released by the government:

What is the new regime?

The new income tax regime provides for concessional tax rates and liberal slabs. However, no deductions are allowed in the new regime (other than those specified for, e.g., 80JJAA, 80M, and standard deduction).

What are the new slabs in the proposed new regime introduced by Finance Bill, 2025?

Up to ₹4 lakh – 0 per cent

₹8 12 lakh – 10 per cent

₹12-16 lakh – 15 per cent

₹16-20 lakh – 20 per cent

₹20-24 lakh – 25 per cent

Above ₹24 lakh – 30 per cent

To claim the benefit of NIL tax liability, what steps are required?

The benefit of such a Nil tax liability is available only in the new tax regime, which is the default regime. To avail of the rebate allowable under the proposed provisions of the new tax regime, only a return must be filed; otherwise, no other step is required.

The change in tax slabs is beneficial for which category of persons?

The new tax regime applies to a person, being an individual or Hindu undivided family or association of persons [other than a cooperative society], or body of individuals, whether incorporated or not, or an arƟficial juridical person referred to in sub-clause (vii) of clause (31) of section 2. Accordingly, a change in tax slabs will benefit all these persons.

How will a person with an income of ₹12 lakh benefit from new rates?

Any individual earlier was required to pay a tax of ₹80,000 (in the new regime) for an income of Rs. 12 lakh. Now, he will be required to pay nil tax on such income.

Is the standard deduction on salary available in the new regime?

In the new regime, a standard deduction of ₹75,000 is available to a taxpayer. Therefore, a salaried taxpayer will not be required to pay any tax where his income before the standard deduction is less than or equal to ₹12,75,000.

How many taxpayers will benefit from the new rates and slabs?

Ans. Presently, for AY 2024-25, about 8.75 crore persons have filed their ITRs. All such assessees paying tax in the new tax regime will benefit from the change in rates and slabs.

What is the extra amount available to the taxpayers due to this change?

Changes in slab, rates, and rebate will make approximately ₹1 lakh crore available to taxpayers.

How is the marginal relief available to individuals?

Under section 115BAC(1A), marginal relief is available to only resident individuals with income marginally above ₹12 lakh in the new regime. For example, for a person having an income of ₹12, 10,000, in the absence of marginal relief, the tax works out to be ₹61,500 (5% of ₹4 lakh+10% of 4 lakh and 15% of ₹10 thousand). However, due to marginal relief, the amount of tax to be actually paid is ₹10,000.

How much tax will be paid by a taxpayer with an income of ₹12,10,000? What is marginal relief?

The tax liability on such taxpayers by slabs is only ₹61,500. However, a person with ₹12 lakh income pays no tax. By providing marginal relief, it has been ensured that the tax payable by a person having income marginally above ₹12 lakh is required to pay only a marginal amount of tax equal to the amount of income above ₹12 lakh so that his carry home is also ₹12 lakh. In this case, he will be required to pay a tax of ₹10,000.

How the marginal relief is computed?

The marginal relief is computed in the following manner:

(i) First the tax as per slab rate is computed on the total income. For e.g. In the answer given to question no.15 above, tax on the total income of ₹12,10,000/-shall be computed in the following steps:

(ii) Tax payable on total income of ₹12,00,000/- on which rebate is available is Nil.

(iii) Now, the tax liability without marginal relief (in this case, ₹61,500) shall be compared with the amount exceeding total income upto which rebate is available [in this case Rs. 10,000, [i.e. Rs12,10,000- Rs. 12,00,000]

(iv) The marginal relief shall be computed by deducting the income exceeding ₹12,10,000 (i.e. Rs.10,000) from the total tax liability determined in this case (i.e. ₹61,500) as tabulated above.

(v) Therefore, in the above case, a rebate by way of marginal relief of ₹51,500 (61,500/- 10,000/-= 51,500/-) is allowed.

(vi) Tax payable is therefore Rs. 10,000 [ ₹61,500- ₹51,500]

What is the maximum rebate available to any taxpayer?

The maximum rebate available is ₹60,000, which is available for a taxpayer with an income of ₹12 lakh, on which tax is payable as per the new slabs.

What is the total income till which marginal relief is admissible?

The total income till which marginal relief is available is about Rs. 12,75,000.

Is special income with special rates, such as capital gains, lottery winnings, etc., also eligible for a rebate?

No rebate is available on income from capital gains or loƩeries or any other income on which a special rate has been provided in the Act. It is available only on the tax payable as per slabs under secƟon 115BAC.

What is the difference between rebate and marginal relief?

A rebate is a tax deduction available to taxpayers with income up to ₹12 lakh in the new regime. Marginal relief ensures that taxpayers with income marginally higher than ₹12 lakh do not pay more tax than the income in excess of ₹12 lakh.

The changes are big and obviously most welcome. They will give some relief to the middle class, which has been waiting for this for the last couple of years, especially considering the inflation and rising costs.

“It’s interesting to note that these changes have been announced only under the new tax regime, again emphasizing the Government’s push to adopt the new tax regime and slowly phase out the old tax regime. The increased tax slabs may make the new regime attractive to many more as the income difference to breakeven the tax liability under both regimes is now roughly INR 8 lakh,” said Sneha Pai, Senior Director, Direct Tax, Nexdigm.