Tax deadlines for Income Tax Returns (ITR) are quite close, whereas there are some significant changes in tax practice provisions effective from the commencement of the new financial year on April 1, 2025. Announced in the Union Budget 2025, these amendments promise great relief to taxpayers in the middle-income group, with increased permissible exemptions and simplified tax slabs.
Important Changes in the Income Tax Rules Effective from April 1, 2025
The Finance Minister, Nirmala Sitharaman, introduced the new tax regime, further major changes reducing the tax burden for salaried individuals and middle-income earners. Let’s take a deep dive into those impactful changes:
1. Tax-Free Income Limit Raised to ₹12 Lakh
Among the larger announcements is the raising of the tax-free limit from ₹7 lakh to ₹12 lakh under the new tax regime; in addition, coupled with the standard deduction of ₹75,000, a taxpayer can now enjoy zero tax on an annual income of up to ₹12.75 lakh.
The amendment enables over one crore taxpayers to benefit by having their tax obligation completely removed.
2. Revised Tax Slabs for Higher Savings
The government has restructured the tax slabs to provide greater relief to individuals earning up to ₹25 lakh per year. Here’s the updated tax structure under the new regime:
- Up to ₹4 lakh: No tax
- ₹4 lakh to ₹8 lakh: 5% tax
- ₹8 lakh to ₹12 lakh: 10% tax
- ₹12 lakh to ₹16 lakh: 15% tax
- ₹16 lakh to ₹20 lakh: 20% tax
- ₹20 lakh to ₹24 lakh: 25% tax
- Above ₹24 lakh: 30% tax
Taxpayers earning up to ₹25 lakh annually can save up to ₹1.1 lakh in taxes due to these revised slabs.
3. Expanded Window for Filing Extended ITR
Under this, the government wants to increase the timeline for an updated declaration of Income Tax Returns from a minimum of two years to four years for any taxpayer who has failed to actually declare true income within the original time. This will therefore assist taxpayers in filing their returns correctly.
Close to 90 lakh taxpayers have updated their income voluntarily by the payment of further taxes, and this would work to make compliance further easier.
4. Increased Tax Exemption Amount for Senior Citizens
New provisions will only be beneficial to senior citizens, as the exemption limit on income earned from interest has been raised from ₹50,000 to ₹1,00,000. This amendment promises retirees and old-age taxpayers a little more security in their finances.