Union Budget 2025 - Income Tax Perspective

This article aims to highlight the significant changes in Income Tax introduced in the Finance Act 2025 which was presented with the Union Budget in the Lok Sabha on 1 February 2025.

The most sought-after relief in every budget is on personal income tax and this time the FM has pleased the middle class with liberalizing the tax slabs under the new scheme (i.e. section 115BAC) as also the rebate.

Sr. No.	Income Slabs	Tax Rate
1.	Up to ₹ 4,00,000	Nil
2.	₹ 4,00,001 to ₹ 8,00,000	5 %
3.	₹ 8,00,001 to ₹ 12,00,000	10 %
4.	₹ 12,00,001 to ₹ 16,00,000	15 %
5.	₹ 16,00,001 to ₹ 20,00,000	20 %
6.	₹ 20,00,001 to ₹ 24,00,000	25 %
7.	Above ₹ 24,00,000	30 %

Section 87A rebate has been increased to a maximum of Rs. 60,000 where total income is up to Rs. 12 lakhs. The tax on income of Rs. 12 lakh is Rs. 60,000, so this effectively brings the tax outgo to zero for individuals earning up to Rs. 12 lakhs. For salaried individuals, there is the standard deduction of Rs. 75,000 so the tax free income limit effectively becomes Rs. 12.75 lakhs. Where total income exceeds Rs. 12 lakhs, the rebate is not applicable, and tax will be calculated as per above slabs. Another important point to note is that there is no change in the tax slabs and rebate in old tax regime. The relaxed thresholds in the new regime make it more attractive over the old regime. A proviso is added to section 87A to clarify that this rebate shall apply only to the tax on income as per slabs of new regime, thereby excluding incomes chargeable to tax at special rates (such as capital gains).

Section 23 relating to annual value of house property has been amended to remove the conditions for non-occupation of second house property for reasons of employment or business at any other place. Hence, no deemed rent for two self occupied house properties irrespective of any reasons.