Income Tax Rule Changes: Six Major Changes For Salaried Employees Starting April 1

The new financial year kickstarted today, April 1, bringing in a few changes to the income tax regulations. These updates, announced by Finance Minister Nirmala Sitharaman in the Union Budget 2025, are aimed at simplifying the tax system. The changes will impact every taxpayer in India in the new financial year.

Here’s a list of some of the key changes in income tax rules that would impact salaried individuals.

Finance Minister Nirmala Sitharaman provided a huge relief to taxpayers in the Union Budget by increasing the tax-free income limit from Rs 7 lakh to Rs 12 lakh. This comes into effect today under the new tax regime.

For salaried people, factoring in the Rs 75,000 standard deduction, income up to Rs 12.75 lakh would be exempt from tax. However, this exemption does not apply to capital gains, which remain subject to separate short-term and long-term tax rates.

The government has introduced new tax slabs under the new tax regime, while the old tax regime remains unchanged:

• Income up to Rs 4 lakh – No tax

• Rs 4 lakh to Rs 8 lakh – 5%

• Rs 8,00,001 to Rs 12 lakh – 10%

• Rs 12,00,001 to Rs 16 lakh – 15%

• Rs 16,00,001 to Rs 20 lakh – 20%

• Rs 20,00,001 to Rs 24 lakh – 25%

• Above Rs 24 lakh – 30%

Taxpayers under the new tax regime will benefit from an increased rebate under Section 87A of the Income Tax Act, 1961. The rebate amount has been raised from Rs 25,000 to Rs 60,000.

This would apply to those with taxable income of up to Rs 12 lakh. In addition, salaried employees will get extra relief in the form of a standard deduction of Rs 75,000. This would increase the threshold to Rs 12.75 lakh under the new regime. But the old tax regime remains unaffected by this update.

Changes to Tax Deducted at Source (TDS) rules will provide relief to small taxpayers. Effective from today, the TDS threshold for interest earned on bank deposits will rise from Rs 40,000 to Rs 50,000.

From April 1, benefits and allowances provided by employers to employees will no longer be classified as taxable perquisites. Also, expenses incurred by employers for employees or their family members seeking medical treatment abroad will not be considered a taxable benefit.

Taxpayers now have an extended period to revise their income tax returns. The timeframe for filing updated income tax returns (ITR-U) has been increased from two years to four years, allowing individuals to correct errors or omissions in their tax filings over a four-year period.

A new avenue for tax saving has been introduced for parents. Salaried employees and other taxpayers contributing to their child’s NPS Vatsalya account can now claim an additional deduction of Rs 50,000 under the old tax regime.