Union Budget 2025: New Income Tax Slabs, Rebates & How Much You Will Pay
The Union Budget 2025 has brought significant changes to India’s income tax system, aiming to provide relief to middle-class taxpayers while ensuring a progressive taxation structure. A major highlight is the increased rebate on salary income up to ₹12.75 lakh, reducing the tax burden for a vast majority of salaried individuals.
Here’s a detailed breakdown of the new tax slabs, rebate provisions, and illustrative examples to help you understand how much tax you’ll actually pay under the new system.
Revised Income Tax Slabs for FY 2025-26
| Annual Income (₹) | Tax Rate (%) |
|---|---|
| 0 – 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 |
Rebate on Salary Income Up to ₹12.75 Lakh
A key reform in Budget 2025 is the expansion of tax rebates under Section 87A, effectively making income up to ₹12.75 lakh tax-free.
How Does This Work?
- If your taxable income (after deductions like HRA, standard deduction, and 80C) is ₹12.75 lakh or below, you qualify for a 100% tax rebate under Section 87A.
- The maximum rebate limit has been raised to ₹50,000, effectively reducing the final tax liability to zero for eligible taxpayers.
- This move aims to provide direct relief to middle-class salaried professionals while boosting disposable income.
Illustrative Tax Calculations
1. Annual Income of ₹6,00,000 (Eligible for Rebate)
- Income up to ₹4,00,000 → No tax
- Income from ₹4,00,001 to ₹6,00,000 (₹2,00,000 @ 5%) → ₹10,000
- Rebate (₹10,000 under Section 87A) → ₹10,000 – ₹10,000 = ₹0 Tax Payable
✔ Final Tax Payable: ₹0 (due to rebate)
2. Annual Income of ₹10,00,000 (Eligible for Rebate)
- Income up to ₹4,00,000 → No tax
- Income from ₹4,00,001 to ₹8,00,000 (₹4,00,000 @ 5%) → ₹20,000
- Income from ₹8,00,001 to ₹10,00,000 (₹2,00,000 @ 10%) → ₹20,000
- Total Tax Before Rebate: ₹40,000
- Rebate under 87A (₹40,000) → ₹40,000 – ₹40,000 = ₹0 Tax Payable
✔ Final Tax Payable: ₹0 (due to rebate)
3. Annual Income of ₹15,00,000 (Rebate NOT Applicable)
- Income up to ₹4,00,000 → No tax
- Income from ₹4,00,001 to ₹8,00,000 (₹4,00,000 @ 5%) → ₹20,000
- Income from ₹8,00,001 to ₹12,00,000 (₹4,00,000 @ 10%) → ₹40,000
- Income from ₹12,00,001 to ₹15,00,000 (₹3,00,000 @ 15%) → ₹45,000
- Total Tax Payable: ₹1,05,000
✔ Final Tax Payable: ₹1,05,000 (No rebate since income exceeds ₹12.75 lakh)
4. Annual Income of ₹25,00,000 (Higher Tax Slab Impact)
- Income up to ₹4,00,000 → No tax
- Income from ₹4,00,001 to ₹8,00,000 (₹4,00,000 @ 5%) → ₹20,000
- Income from ₹8,00,001 to ₹12,00,000 (₹4,00,000 @ 10%) → ₹40,000
- Income from ₹12,00,001 to ₹16,00,000 (₹4,00,000 @ 15%) → ₹60,000
- Income from ₹16,00,001 to ₹20,00,000 (₹4,00,000 @ 20%) → ₹80,000
- Income from ₹20,00,001 to ₹24,00,000 (₹4,00,000 @ 25%) → ₹1,00,000
- Income above ₹24,00,000 (₹1,00,000 @ 30%) → ₹30,000
✔ Final Tax Payable: ₹3,30,000
Key Takeaways from Union Budget 2025 Tax Reforms
✅ Higher Tax-Free Income Limit: No tax on annual income up to ₹12.75 lakh, benefiting middle-class salaried individuals.
✅ Lower Tax Burden: The new slab structure reduces tax rates for middle-income earners, increasing disposable income.
✅ Encouraging Investment & Savings: The rebate incentivizes taxpayers to maximize deductions under 80C, 80D, and HRA to reduce taxable income below ₹12.75 lakh.
✅ Progressive Taxation for High Earners: Higher-income groups above ₹20 lakh face increased tax rates to ensure fair wealth distribution.
Final Thoughts
The Union Budget 2025 tax reforms provide a significant boost to salaried taxpayers, making earnings up to ₹12.75 lakh effectively tax-free. For those earning beyond this threshold, a progressive tax system ensures fair taxation while maintaining fiscal discipline.
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References:
apnews.com💬 What are your thoughts on the new tax slabs? Do you benefit from the increased rebate? Share your views in the comments below!
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