Major Income Tax Changes Effective From April 1: New Tax Slabs, Rebate Explained

The Union Budget 2025-26, presented in Feb., introduced significant changes in the income tax structure, eliminating tax up to an income of Rs 12 lakh. During her speech in the Parliament, Finance Minister Nirmala Sitharaman said that the move was aimed at benefiting taxpayers by boosting household consumption expenditure and encouraging increased investment.

The revised income tax rules take effect from Apr. 1. To be clear, there are two income tax regimes in India: old and new. The new regime is more simplified with fewer deductions available. Within this regime, new tax slabs have been introduced for the upcoming financial year.

Under the new rules, there will be no income tax on annual income up to Rs 12 lakh. This limit will extend to Rs 12.75 lakh for salaried taxpayers with a standard deduction of Rs 75,000. Above the Rs 12 lakh threshold, income will be taxed fully with no rebate benefits. However, to provide relief to taxpayers, the finance ministry has made the income tax slabs more favourable with improved rates.

Rs 0-4 lakh: Nil (No tax)

Rs 4-8 lakh: 5% tax

Rs 8-12 lakh: 10% tax

Rs 12-16 lakh: 15% tax

Rs 16-20 lakh: 20% tax

Rs 20-24 lakhs: 25% tax

Above Rs 24 lakh: 30% tax

Direct income till Rs 12 lakh: Nil tax

Income above Rs 12 lakh: 

For salaried class: Additional Rs 75,000 standard deduction

For others, income of Rs 12.1 lakh will be taxed as:

• Rs 0 - 4,00,000: Nil (No tax)

• Rs 4,00,000 - Rs 8,00,000: Rs 4,00,000 taxed at 5% = Rs 20,000

• Rs 8,00,000 - Rs 12,00,000: Rs 4,00,000 taxed at 10% = Rs 40,000

• Rs 12,00,000 - Rs 12,10,000: Rs 10,000 taxed at 15% = Rs 1,500

So, the tax payable for an income of Rs 12.1 lakh is Rs 61,500 under the new tax regime.

Under this regime, an income of Rs 16 lakh will be taxed Rs 1.2 lakh against Rs 1.7 lakh under the previous tax slabs.

Tax Slabs Under Old Income Tax Regime:

• Rs 0 - 2,50,000: 0% tax (No tax for income up to Rs 2.5 lakh)

• Rs 2,50,001 - 5,00,000: 5% tax (5% on income between Rs 2.5 lakh and Rs 5 lakh)

• Rs 5,00,001 - 10,00,000: 20% tax (20% on income between Rs 5 lakh and Rs 10 lakh)

• Rs 10,00,001 and above: 30% tax (30% on income above Rs 10 lakh)

These are the tax slabs for the old income tax regime, under which taxpayers get several deduction benefits such as Section 80C, 80D, and more.