Income Tax Reform 2025

New Income Tax Reforms for 2025: What You Need to Know

In a landmark announcement for the financial year 2025, Finance Minister Nirmala Sitaraman has unveiled a revamped income tax structure that promises relief for salaried individuals and introduces a simplified slab system. The new regime is designed to ease the tax burden for many and streamline compliance with clear-cut slabs and deductions.

Key Highlights of the New Tax Regime

1. Tax Exemption for Salaried Employees
   One of the most applauded measures is that salaried employees earning up to ₹12,00,000 per annum will be completely exempt from paying income tax. This move aims to ease the financial pressure on a vast section of taxpayers and ensure that take-home salaries have a positive impact.

2. Standard Deduction
   In addition to the exemption, every salaried individual will be entitled to a standard deduction of ₹75,000. This deduction will automatically reduce the taxable income, further lightening the tax load even for those whose incomes exceed the ₹12,00,000 threshold.

3. The New Tax Slabs
   For those whose taxable income exceeds the exempted limit, the new tax slabs are structured as follows:

   • ₹0 - ₹4,00,000: NIL
     No tax will be levied on income up to ₹4 lakh, offering immediate relief for lower-income earners.

   • ₹4,00,000 - ₹8,00,000: 5%
     Income in this bracket will be taxed at a modest rate of 5%.

   • ₹8,00,000 - ₹12,00,000: 10%
     A 10% rate applies for income falling between ₹8 lakh and ₹12 lakh.

   • ₹12,00,000 - ₹16,00,000: 15%
     For incomes between ₹12 lakh and ₹16 lakh, a rate of 15% will be applicable.

   • ₹16,00,000 - ₹20,00,000: 20%
     Those earning between ₹16 lakh and ₹20 lakh will see a tax rate of 20%.

   • ₹20,00,000 - ₹24,00,000: 25%
     A higher bracket is set for incomes between ₹20 lakh and ₹24 lakh with a 25% tax rate.

   • Above ₹24,00,000: 30%
     For the highest earners, any income above ₹24 lakh will be taxed at a rate of 30%.

Understanding the Impact