Starting April 1, 2025, major changes in India’s income tax system will come into effect. These updates will impact salaried employees, businesses, investors, and homeowners. Let’s dive into the top 10 tax rule changes that could affect you.
1. Tax-Free Income Limit Increased – Pay Less Tax!
The government has raised the tax-free income threshold, giving relief to middle-class taxpayers.
| Category | Old Limit (FY 2024-25) | New Limit (FY 2025-26) |
|---|---|---|
| Basic Tax-Free Income | ₹7 lakh | ₹12 lakh |
| With Standard Deduction | ₹7.5 lakh | ₹12.75 lakh |
If your income is below ₹12.75 lakh (including standard deduction), you won’t have to pay any income tax under the new regime. This means more savings for the common taxpayer!
2. New Income Tax Slabs – Who Pays What?
The new tax structure lowers tax rates for middle-income groups while keeping higher rates for high earners.
| Annual Income | Tax Rate (2025 Onwards) |
|---|---|
| Up to ₹4 lakh | 0% |
| ₹4 lakh – ₹8 lakh | 5% |
| ₹8 lakh – ₹12 lakh | 10% |
| ₹12 lakh – ₹16 lakh | 15% |
| ₹16 lakh – ₹20 lakh | 20% |
| ₹20 lakh – ₹24 lakh | 25% |
| Above ₹24 lakh | 30% |
This new structure provides more relief to those earning up to ₹12 lakh while keeping the higher brackets unchanged.
3. Standard Deduction Raised – More Savings for Salaried Employees
The standard deduction for salaried individuals and pensioners has been increased from ₹50,000 to ₹75,000. This means additional tax savings for millions of taxpayers.
| Category | Old Standard Deduction | New Standard Deduction |
|---|---|---|
| Salaried Employees | ₹50,000 | ₹75,000 |
| Pensioners | ₹50,000 | ₹75,000 |
If you earn ₹12.75 lakh, the first ₹75,000 is tax-free!
4. Higher Tax Rebate Under Section 87A
Earlier, individuals earning up to ₹7 lakh received a full tax rebate. Now, the limit has been increased to ₹12 lakh. If your taxable income is within this range, you won’t have to pay any tax.
| Annual Income | Tax Rebate (Before April 2025) | Tax Rebate (After April 2025) |
|---|---|---|
| Up to ₹7 lakh | Full rebate (No tax) | – |
| Up to ₹12 lakh | No rebate | Full rebate (No tax) |
5. TDS on Rental Income – New Rules for Tenants and Landlords
If you pay more than ₹50,000 per month in rent, you must deduct TDS (Tax Deducted at Source) before paying your landlord. Earlier, this applied only to rent exceeding ₹2.4 lakh annually.
This move ensures better compliance and reporting of rental income.
6. ULIPs to Be Taxed as Capital Gains – No More Tax-Free Withdrawals!
- If the total premium paid for ULIPs exceeds ₹2.5 lakh per year, the maturity amount will now be taxed as capital gains instead of being tax-free.
- If ULIPs are held for more than 3 years, they will be taxed as long-term capital gains (LTCG) at 10% if gains exceed ₹1 lakh.
- If ULIPs are surrendered before 3 years, they will be taxed as short-term capital gains (STCG) at 15%.
Impact on Investors
Investors who used ULIPs as a tax-saving investment will now need to rethink their strategy. Those preferring tax-free returns may shift towards PPF, EPF, or NPS, which still offer exemptions.
7. Deemed Let-Out Property – No More Automatic Tax on Second House!
Earlier, if you owned more than one residential property, the second house (even if left vacant) was considered “deemed let-out property” and taxed based on its notional rental income.
What’s Changing?
- Homeowners no longer need to pay tax on the notional rental income of their second property.
- If you own multiple houses, you can keep them vacant without any additional tax burden.
How This Helps Homeowners
- Earlier, many investors and NRIs faced extra tax liability just because they owned multiple properties.
- With this change, property owners won’t be forced to rent out their second home just to avoid taxation.
8. Higher TDS Limit for Senior Citizens – More Income, Less Tax
The exemption limit for TDS on interest income for senior citizens has doubled from ₹50,000 to ₹1 lakh per year. This means retirees can now earn more interest without worrying about tax deductions.
9. More Time to File Updated Returns
Taxpayers can now revise or update their tax returns for up to four years instead of two. This provides more flexibility to correct mistakes or declare undisclosed income without facing heavy penalties.
10. A New Income Tax Bill is Coming!
The government is working on a new Income Tax Bill to simplify tax laws and reduce paperwork for individuals and businesses. Expect streamlined processes, fewer complications, and a more taxpayer-friendly system.
Did You Know?
Over 5 crore taxpayers will benefit from the increased tax-free income limit! This move is expected to boost spending and savings across India.
Also read: Income Tax Return Filing? Don’t Start Without These Essential Documents!
Final Thoughts
These tax changes impact a wide range of taxpayers, including salaried individuals, business owners, property investors, and retirees:
✔️ ULIP investors will now pay capital gains tax on maturity proceeds if premiums exceed ₹2.5 lakh per year.
✔️ People owning multiple houses will no longer pay tax on deemed rental income for their second home.
✔️ Higher rebates and deductions mean lower tax burdens for middle-class taxpayers.
These updates aim to put more money in the hands of taxpayers while improving compliance. Whether you are a salaried employee, business owner, or investor, these updates will impact your tax planning for FY 2025-26.
Make sure you understand these rules and take full advantage of the new benefits!
Disclaimer
The information provided in this article is for general informational purposes only and does not constitute legal, tax, financial, or other professional advice. While every effort is made to ensure the accuracy and reliability of the information, laws and regulations may change, and individual circumstances vary.
Readers are encouraged to consult with qualified professionals or official government resources for personalized guidance regarding their specific situations. The author and publisher disclaim any liability for decisions made or actions taken based on the information provided herein.
