After the Union Budget 2025, taxpayers are confused about how much income will be tax-free under the new tax regime. The key question is:
- Is income up to ₹7 lakh tax-free?
- Or is income up to ₹12 lakh completely exempt from tax?
Let’s break this down based on the latest income tax slab rates, rebates, and deductions announced in Budget 2025.
Tax-Free Income Under the New Tax Regime Until 31st March 2025
For FY 2024-25 (AY 2025-26):
- Income up to ₹7 lakh is tax-free due to the rebate under Section 87A.
- Taxpayers earning up to ₹7 lakh do not need to pay any income tax.
- Standard Deduction of ₹75,000 for salaried persons on salary/pension further reduces taxable income.
For FY 2025-26 (AY 2026-27):
- The tax-free income limit has been increased to ₹12 lakh under the new tax regime.
- Taxpayers earning up to ₹12 lakh will get a rebate of ₹60,000, making their tax liability zero.
- Standard Deduction of ₹75,000 continues for salaried individuals on salary/pension, providing additional tax relief.
Thus, until 31st March 2025 (for FY 2024-25), the tax-free limit is ₹7 lakh.
However, from 1st April 2025 (for FY 2025-26), the tax-free limit will increase to ₹12 lakh.
Updated Income Tax Slab Rates Under the New Regime
For FY 2024-25 (AY 2025-26)
| Annual Income (₹) | Tax Rate (%) |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 to ₹7,00,000 | 5% |
| ₹7,00,001 to ₹10,00,000 | 10% |
| ₹10,00,001 to ₹12,00,000 | 15% |
| ₹12,00,001 to ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
For FY 2025-26 (AY 2026-27)
| Annual Income (₹) | 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 Change: The highest 30% tax rate will now apply only to incomes above ₹24 lakh (instead of ₹15 lakh).
Rebate, Standard Deduction, Surcharge, and Cess
Rebate Under Section 87A
- For FY 2024-25:
- Taxpayers with a total income up to ₹7,00,000 get a rebate of ₹25,000, making their tax liability zero.
- For FY 2025-26:
- Taxpayers with an income up to ₹12,00,000 get a rebate of ₹60,000, making their tax liability zero.
Surcharge on High-Income Earners
- 10% of income tax for income between ₹50 lakh and ₹1 crore.
- 15% for income between ₹1 crore and ₹2 crore.
- 25% for income above ₹2 crore
Health & Education Cess
- A 4% cess is applicable on the total tax amount, including the surcharge.
Conclusion: ₹7 Lakh or ₹12 Lakh Tax-Free?
🔹 If your income is up to ₹7 lakh, you don’t have to pay tax until 31st March 2025 under the new regime.
🔹 From 1st April 2025, the tax-free limit will increase to ₹12 lakh due to an enhanced rebate under Section 87A.
🔹 Salaried employees and pensioners will also benefit from a ₹75,000 standard deduction, reducing taxable income further.
📢 What Should You Do?
- If your income is below ₹7 lakh, you don’t need to worry about tax for FY 2024-25.
- If your income is ₹12 lakh or lower, from 1st April 2025, you can pay zero tax under the new regime.
- Consider opting for the new tax regime if you don’t claim deductions under Section 80C, 80D, HRA, etc.
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