Income Tax Bill 2025: New Tax Slabs, Deductions & Key Changes You Must Know
1. Introduction
The Income Tax Bill 2025 is a significant update in India's taxation framework, aimed at simplifying tax compliance, revising exemptions, and altering tax slabs. With an emphasis on digitalization, transparency, and taxpayer benefits, this bill introduces reforms that impact salaried employees, business owners, and investors alike.
Why is the Income Tax Bill 2025 Important?
Tax laws play a crucial role in shaping economic growth and individual financial planning. Every year, the government revises tax policies to:
✔️ Encourage savings and investments
✔️ Boost business growth through tax relief
✔️ Improve compliance through streamlined processes
✔️ Address loopholes and increase revenue collection
The 2025 Income Tax Bill aims to balance these goals while reducing the tax burden on certain income groups and ensuring equitable tax distribution.
Key Highlights of Income Tax Bill 2025
✅ Revised Income Tax Slabs – Changes in tax rates for different income categories.
✅ Higher Standard Deductions – More tax relief for salaried individuals.
✅ Capital Gains Tax Changes – New taxation policies for stocks, real estate, and mutual funds.
✅ TDS and TCS Amendments – Modified tax collection at source for businesses.
✅ New Tax Filing Rules – Mandatory e-filing and digital verification for faster processing.
✅ GST and Indirect Tax Reforms – Simplified compliance for businesses and freelancers.
2. New Income Tax Slabs & Rates in 2025
The Income Tax Bill 2025 introduces significant changes to the tax slabs, aiming to provide relief to middle-class taxpayers while ensuring higher contributions from high-income earners. The new tax structure is designed to simplify tax compliance and encourage financial planning.
Revised Tax Slabs for FY 2025-26
The government has proposed the following income tax slabs under the new tax regime:
| Annual Income | Old Tax Rate | New Tax Rate (2025) |
|---|---|---|
| Up to ₹2.5 lakh | Exempt | Exempt |
| ₹2.5 lakh – ₹5 lakh | 5% | 5% |
| ₹5 lakh – ₹7.5 lakh | 10% | 5% |
| ₹7.5 lakh – ₹10 lakh | 15% | 10% |
| ₹10 lakh – ₹12.5 lakh | 20% | 15% |
| ₹12.5 lakh – ₹15 lakh | 25% | 20% |
| Above ₹15 lakh | 30% | 25% |
👉 Higher exemption limit: The basic exemption limit remains ₹2.5 lakh, but individuals earning up to ₹7 lakh will continue to benefit from tax rebates under Section 87A.
👉 Lower rates for middle-income groups: Taxpayers earning between ₹5 lakh and ₹12.5 lakh will see reduced rates, resulting in significant savings.
👉 Surcharge adjustments: For individuals earning above ₹5 crore, the surcharge has been revised to ensure progressive taxation.
Old vs. New Tax Regime: Which One is Better?
With the new tax slabs, taxpayers must decide whether to continue with the old tax regime or opt for the new one. The old tax regime provides benefits like HRA, standard deduction, and investment exemptions under Section 80C, 80D, and 24(b). However, the new regime offers lower tax rates with minimal exemptions, making it suitable for individuals who prefer a simplified approach.
How the 2025 Tax Slabs Benefit You
✅ Middle-class relief: Lower tax rates mean higher take-home salary.
✅ Simplified taxation: Fewer deductions make tax filing hassle-free.
✅ Encourages spending: More disposable income can boost the economy.
3. Major Deductions & Exemptions in 2025
The Income Tax Bill 2025 introduces revised deductions and exemptions, ensuring that taxpayers can maximize savings while simplifying tax compliance. While the new tax regime offers lower tax rates with fewer deductions, the old regime still provides substantial benefits for those who invest in tax-saving instruments.
Key Tax Deductions & Exemptions in FY 2025-26
1. Standard Deduction Increase
📌 The standard deduction for salaried individuals and pensioners has been increased from ₹50,000 to ₹75,000, providing additional relief for middle-income taxpayers.
2. Section 80C (Investment-Based Deductions) – ₹1.5 Lakh
Under the old tax regime, taxpayers can still claim deductions of up to ₹1.5 lakh for investments in:
✅ Public Provident Fund (PPF)
✅ Employee Provident Fund (EPF)
✅ National Pension Scheme (NPS)
✅ Equity-Linked Saving Schemes (ELSS)
✅ Life Insurance Premiums
✅ Tax-Saving Fixed Deposits (FDs)
📌 No changes in the 80C limit were announced in Budget 2025-26.
3. Section 80D (Health Insurance Premiums) – ₹50,000
📌 Medical insurance premium deductions remain the same at:
✅ ₹25,000 for individuals and families
✅ ₹50,000 for senior citizens
Additionally, medical expenses for senior citizens without insurance are deductible up to ₹50,000.
4. Home Loan Interest Deduction (Section 24b) – ₹2 Lakh
📌 Homeowners can continue to claim a ₹2 lakh deduction on home loan interest under Section 24(b).
📌 First-time homebuyers under the Affordable Housing Scheme can avail of additional benefits under Section 80EEA.
5. House Rent Allowance (HRA) Exemptions
📌 HRA exemptions remain applicable only under the old tax regime.
📌 Employees can claim up to 50% of their basic salary as HRA if they live in metro cities and 40% for non-metro cities.
6. Section 80E – Education Loan Interest
📌 100% deduction on education loan interest for higher studies, valid for 8 years from the start of repayment.
7. National Pension System (NPS) Tax Benefits
📌 Employer contributions to NPS (up to 10% of salary) are fully exempt from taxable income.
📌 Self-contribution allows a deduction of ₹50,000 under Section 80CCD(1B) in addition to the ₹1.5 lakh under 80C.
Tax Deductions & Exemptions Removed or Modified in 2025
❌ LTA (Leave Travel Allowance) exemption has been discontinued under the new tax regime.
❌ Tax-free allowances & reimbursements (such as mobile bill reimbursement) have been eliminated under the simplified tax system.
❌ No 80C, 80D, or HRA benefits in the new tax regime.
Should You Choose the Old or New Tax Regime?
👉 If you have high investments & deductions, the old regime is more beneficial.
👉 If you don’t claim many exemptions, the new regime offers lower tax rates & simplified compliance.
4. Changes in Corporate Taxation in 2025
The Income Tax Bill 2025 introduces several changes in corporate taxation, aiming to simplify compliance, attract foreign investment, and promote economic growth. The government has focused on lowering corporate tax rates, streamlining tax filing processes, and ensuring tax transparency.
Key Corporate Tax Changes in FY 2025-26
1. Corporate Tax Rate Adjustments
📌 The corporate tax rate for domestic companies remains at 22% under the simplified tax regime.
📌 New manufacturing companies established after October 1, 2019, and commencing operations before March 31, 2025, can continue to avail of the 15% tax rate.
📌 Foreign companies are still taxed at 40%, but certain relaxations have been introduced to ease compliance for global businesses operating in India.
2. Minimum Alternate Tax (MAT) Revisions
📌 MAT rate reduced from 15% to 10% for companies opting for the old tax regime.
📌 Companies under the new tax regime remain exempt from MAT.
📌 Startups and loss-making companies with accumulated losses can now carry forward MAT credits for 15 years instead of 10 years.
3. Startups & MSMEs – Tax Incentives
📌 Startups registered under DPIIT will continue to get 100% tax exemption on profits for the first three years if they meet eligibility criteria.
📌 The turnover limit for startups to qualify for tax exemption has been increased to ₹150 crores from the previous ₹100 crores.
📌 MSMEs with a turnover of up to ₹5 crores are eligible for lower compliance requirements, including simplified tax filing procedures.
4. Tax Deductions for R&D & Digital Innovation
📌 200% tax deduction on R&D expenses for companies investing in innovation, AI, and emerging technologies.
📌 New tax credits for companies adopting green energy solutions and sustainable business practices.
📌 Increased tax benefits for companies engaged in semiconductor and AI development under the government’s Digital India mission.
5. Transfer Pricing & International Taxation Changes
📌 The government has tightened transfer pricing rules to curb tax avoidance by multinational corporations.
📌 Companies involved in cross-border transactions must maintain stricter documentation & disclosures.
📌 Equalization levy on digital transactions remains unchanged, but new guidelines have been issued for foreign e-commerce platforms operating in India.
6. Corporate Tax Compliance – Simplified Filing & Automation
📌 The government has introduced a single-window tax compliance portal to streamline TDS, GST, and corporate tax filing.
📌 Pre-filled tax returns for companies based on their financial disclosures & GST filings.
📌 Reduced scrutiny for companies with consistent tax compliance history.
Impact on Businesses
✅ Lower tax burden on startups and MSMEs.
✅ More incentives for R&D and digital adoption.
✅ Reduced compliance burden with automated tax filing.
❌ Stricter tax regulations for multinational corporations.
5. New GST Rules & Indirect Taxation in 2025
The Income Tax Bill 2025 has introduced significant updates to GST (Goods and Services Tax) and other indirect taxes to enhance tax compliance, reduce fraud, and streamline tax filing processes. The government’s focus remains on simplification, automation, and widening the tax base to boost revenue collection.
Key GST Changes in Budget 2025-26
1. Revised GST Slabs & Rate Adjustments
📌 The 5% GST slab has been revised, with certain essential goods now tax-free to curb inflation.
📌 The 18% GST slab remains unchanged, covering services and mid-tier goods.
📌 Luxury goods & sin products (like cigarettes & high-end cars) now attract higher cess rates to discourage consumption.
📌 Certain MSME and startup services have been moved to lower tax brackets for ease of doing business.
2. E-Invoicing & Compliance Automation
📌 E-invoicing threshold has been lowered to ₹5 crores (previously ₹10 crores), making digital invoicing mandatory for more businesses.
📌 Introduction of AI-based GST compliance tracking to reduce tax fraud.
📌 The government has introduced a single-window GST filing system, allowing seamless integration with income tax & corporate tax filing.
3. GST Input Tax Credit (ITC) Reforms
📌 Stricter ITC claims: Only invoices uploaded in the GST portal will be eligible for ITC claims to curb fraudulent claims.
📌 Faster ITC refunds: Businesses with clean compliance records will receive automatic ITC refunds within 15 days.
📌 Cross-checking mechanism: GST invoices will be matched with supplier tax payments before credit approval.
4. Special Provisions for MSMEs & Startups
📌 GST exemption for small businesses raised from ₹40 lakhs to ₹50 lakhs turnover.
📌 Introduction of quarterly GST filing for businesses with turnover below ₹5 crores to reduce compliance burden.
📌 Zero-rated GST benefits for exporters streamlined, ensuring faster refund processing.
5. Sector-Specific GST Updates
📌 E-commerce sellers now require real-time GST reporting for transactions above ₹1 lakh.
📌 Food delivery platforms & aggregators (like Swiggy, Zomato) must collect and deposit GST directly on behalf of restaurants.
📌 Real estate & construction GST adjustments: Lower GST rates on affordable housing projects to promote home ownership.
6. Customs Duty & Import Tax Adjustments
📌 Higher import duties on luxury items to promote domestic manufacturing under Atmanirbhar Bharat.
📌 Lower customs duties on essential raw materials like semiconductors & EV components to boost Make in India initiatives.
📌 Introduction of AI-driven customs clearances for faster import/export processing.
7. Compliance & Penalty Reforms
📌 GST late filing penalties increased for businesses with repeated non-compliance.
📌 AI-based GST audits will automatically flag fake invoices & suspicious transactions.
📌 Simplified GST cancellation & reinstatement process for businesses with genuine errors.
Impact on Businesses
✅ Lower compliance burden for MSMEs & startups.
✅ Faster refunds & easier ITC claims.
✅ Boost for Make in India with lower customs duties.
❌ Stricter compliance & penalties for fraud detection.
6. Personal Income Tax Changes in 2025
The Income Tax Bill 2025 has introduced key changes affecting salaried individuals, senior citizens, and self-employed taxpayers. These updates aim to simplify tax compliance, provide relief to middle-class taxpayers, and enhance financial transparency.
1. Income Tax Slab Changes & Exemptions
📌 No major changes in tax slabs under the new tax regime, but some deductions have been revised.
📌 Standard deduction for salaried employees increased from ₹50,000 to ₹75,000 to provide additional tax relief.
📌 Higher rebate under Section 87A, increasing the tax-free income limit from ₹7 lakhs to ₹8 lakhs under the new regime.
📌 Senior citizens get additional tax benefits with an increased exemption limit of ₹5 lakhs under the old tax regime.
2. Increase in 80C & 80D Deductions
📌 Section 80C deduction limit raised from ₹1.5 lakh to ₹2 lakh to encourage savings & investments.
📌 Section 80D (health insurance premium deduction) limit increased for families and senior citizens.
📌 Tax benefits on NPS (National Pension System) contributions improved for government & private employees.
3. Capital Gains Tax Reforms
📌 Uniform capital gains tax structure introduced, simplifying taxation across asset classes.
📌 Real estate capital gains exemption limit increased to encourage home ownership.
📌 Higher TDS threshold for property sales, reducing compliance burden for home sellers.
4. New Deductions & Allowances
📌 Additional home loan interest deduction for first-time home buyers in affordable housing.
📌 Incentives for EV (electric vehicle) buyers in the form of higher tax deductions on loans.
📌 Tax-free benefits for startup employees, reducing tax burden on ESOPs (Employee Stock Ownership Plans).
5. Stricter Tax Compliance Measures
📌 Mandatory PAN-Aadhaar linking for all taxpayers to streamline tax filing.
📌 Higher penalties for undisclosed income, targeting tax evasion.
📌 Introduction of AI-based tax assessment, reducing human intervention & faster processing of returns.
6. TDS & Advance Tax Changes
📌 Higher TDS threshold for freelancers & consultants, reducing compliance hassle.
📌 Simplified advance tax calculation for self-employed individuals based on digital transactions.
📌 Auto-adjustment of TDS refunds for taxpayers with past dues.
7. Digital Taxation & Crypto Regulations
📌 10% TDS on cryptocurrency trading remains unchanged, ensuring digital assets are taxed.
📌 New tax guidelines for digital transactions & influencer earnings.
📌 Clarity on taxation of foreign income, helping Indians working abroad.
Impact on Individuals
✅ Higher deductions for salaried employees & senior citizens.
✅ Simplified capital gains tax for property & stock investments.
✅ Incentives for home buyers, EV users & startup employees.
❌ Stricter compliance rules to prevent tax evasion.
7. Corporate Tax & Business Taxation Updates in 2025
The Income Tax Bill 2025 introduces significant reforms in corporate taxation, aimed at boosting economic growth, supporting startups, and improving tax compliance. The government’s focus is on reducing tax burdens, streamlining compliance, and encouraging digital transactions for businesses.
1. Corporate Tax Rate Revisions
📌 No change in the corporate tax rate for large businesses, which remains at 22% (without exemptions) and 30% (with exemptions).
📌 Lower corporate tax of 15% extended for new manufacturing companies till March 2026 to encourage industrial growth.
📌 Reduction in Minimum Alternate Tax (MAT) from 15% to 12%, providing relief to companies with lower taxable income.
2. Startups & MSME Tax Benefits
📌 Tax holiday for startups extended by one more year, allowing eligible startups to claim a 100% tax exemption for three consecutive years.
📌 MSME sector gets tax relief with an increased turnover threshold for concessional tax rates.
📌 Easier compliance for small businesses with a simplified presumptive taxation scheme under Section 44AD & 44ADA.
3. Digital Transactions & TDS/TCS Updates
📌 Higher TDS threshold for freelancers & gig workers, reducing compliance burden.
📌 No TCS (Tax Collected at Source) on foreign remittances up to ₹10 lakh per year, making international transactions smoother.
📌 Special tax incentives for fintech and digital payment companies, promoting digital economy adoption.
4. Capital Gains & Business Asset Taxation
📌 Rationalization of capital gains tax on business asset sales, making tax computation easier.
📌 Higher depreciation limits on digital infrastructure investments, encouraging IT and automation spending.
📌 Tax benefits on reinvestment of capital gains in government bonds or infrastructure projects.
5. Compliance Simplification & Automation
📌 New AI-based tax assessment system for businesses to reduce manual scrutiny.
📌 GST compliance integrated with income tax filings, making tax reporting seamless.
📌 Introduction of automated tax refund processing for corporates, reducing refund delays.
6. Industry-Specific Tax Benefits
📌 Extended R&D tax deductions for pharmaceutical, automobile, and AI-driven companies.
📌 Green energy businesses receive additional tax credits, promoting sustainability.
📌 Tax breaks for companies investing in electric vehicles & renewable energy projects.
7. International Taxation & Transfer Pricing
📌 Tighter transfer pricing regulations to prevent profit shifting by MNCs.
📌 Lower tax rates on foreign investments to attract global capital.
📌 Easier repatriation of profits for foreign subsidiaries in India.
8. Penalties & Anti-Tax Evasion Measures
📌 Higher penalties for under-reporting business income and non-disclosure of foreign assets.
📌 AI-driven detection of fraudulent tax claims, reducing tax evasion.
📌 Strict compliance requirements for cryptocurrency businesses, ensuring transparency.
Impact on Businesses
✅ Lower tax rates for MSMEs & startups.
✅ Simplified compliance through automation & AI-based assessments.
✅ Tax incentives for green energy, digital economy & manufacturing.
❌ Stricter tax scrutiny on multinational corporations & crypto transactions.
8. GST & Indirect Tax Reforms in 2025
The Income Tax Bill 2025 introduces significant reforms in GST and indirect taxes to enhance compliance, reduce tax evasion, and promote economic growth. With an increasing focus on automation, AI-driven tax assessments, and digital payments, businesses can expect simplified tax procedures and faster refunds.
1. GST Rate Revisions & Slab Restructuring
📌 No major changes in GST slab rates, but restructuring is expected in certain sectors like textiles, real estate, and automobiles.
📌 Essential goods like healthcare & education continue to remain under lower tax slabs, ensuring affordability.
📌 Luxury goods, tobacco, and online gaming attract higher GST, with sin tax rates increasing.
2. Input Tax Credit (ITC) & Compliance Simplification
📌 Faster ITC processing with AI-powered reconciliation, reducing fraudulent claims.
📌 Seamless ITC claims for MSMEs by linking e-invoicing with GST returns.
📌 Quarterly GST filing option extended for small businesses to ease compliance.
3. GST on Digital Economy & E-Commerce
📌 Unified tax framework for gig workers & freelancers, ensuring clarity on GST applicability.
📌 Tighter GST norms for online gaming, crypto, and fintech companies, ensuring tax compliance.
📌 Zero-rated GST for export-based SaaS & IT companies, boosting the IT sector.
4. AI-Driven GST Audits & Anti-Tax Evasion Measures
📌 Introduction of AI-powered GST scrutiny, reducing manual interventions.
📌 Higher penalties for mismatched invoices and fake ITC claims.
📌 Mandatory e-invoicing for businesses with turnover above ₹5 crore, increasing transparency.
5. Customs Duty & Import-Export Tax Changes
📌 Lower import duties on semiconductor chips, AI hardware & renewable energy equipment, encouraging domestic production.
📌 Higher duties on non-essential imports to promote ‘Make in India’ initiatives.
📌 Simplified export tax refunds, ensuring faster cash flow for exporters.
6. GST Refund & Dispute Resolution Mechanism
📌 Automated GST refund system, reducing refund processing time from 30 days to 10 days.
📌 AI-based dispute resolution system, lowering litigation costs for businesses.
📌 Industry-wise GST helpdesks launched, improving support for taxpayers.
7. Impact on Businesses & Consumers
✅ Lower compliance burden for MSMEs with quarterly GST filings.
✅ Faster ITC & refunds boost liquidity for businesses.
✅ Tax benefits for industries like EVs, renewable energy & IT exports.
❌ Stricter tax scrutiny on luxury goods, online gaming & digital businesses.
Conclusion
The GST & Indirect Tax reforms in Budget 2025-26 aim to simplify compliance, improve tax transparency, and boost economic growth. Businesses should stay updated with GST rule changes, implement automated tax solutions, and consult tax professionals for better compliance strategies.
9. Personal Taxation & Deductions in 2025
The Income Tax Bill 2025 introduces significant changes in personal taxation and deductions, impacting salaried employees, professionals, and self-employed individuals. With a strong focus on tax simplification, digital compliance, and increased standard deductions, the new tax provisions aim to reduce tax burdens while ensuring financial discipline.
1. New Income Tax Slabs & Standard Deduction
📌 Revised income tax slabs under the new tax regime, making taxation simpler.
📌 Standard deduction increased for salaried and pensioned individuals, providing additional relief.
📌 No major changes in the old tax regime, but deductions under Sections 80C, 80D, and HRA continue.
| Income Slab (₹) | Tax Rate (%) (New Regime) |
|---|---|
| Up to 3 lakh | Nil |
| 3 – 6 lakh | 5% |
| 6 – 9 lakh | 10% |
| 9 – 12 lakh | 15% |
| 12 – 15 lakh | 20% |
| Above 15 lakh | 30% |
✅ Rebate under Section 87A continues, making income up to ₹7 lakh tax-free under the new regime.
✅ Salaried individuals & pensioners benefit from an increased ₹60,000 standard deduction.
2. HRA & Home Loan Benefits – What’s Better in 2025?
📌 Comparison between HRA tax benefits vs. home loan deductions under Budget 2025.
📌 Salaried employees: Should they continue renting or buy a house based on new policies?
📌 Tax planning strategies considering new tax slab rates & rental deductions.
✅ HRA tax exemption remains unchanged under the old tax regime.
✅ Home loan interest deduction of ₹2 lakh under Section 24(b) continues.
✅ Additional home loan benefits for first-time buyers under Section 80EE & 80EEA.
3. Increase in 80C & 80D Deduction Limits?
📌 Expected increase in deduction limits under Section 80C (currently ₹1.5 lakh).
📌 Higher 80D limit for health insurance premiums, benefiting senior citizens.
📌 New savings & investment options introduced for tax-free income.
✅ NPS contributions continue to receive tax benefits.
✅ Enhanced deductions for medical expenses & preventive health check-ups.
✅ ELSS (Equity Linked Savings Scheme) remains a top choice for tax-saving investments.
4. Retirement Planning & Tax-Free Pension Income
📌 Tax exemptions on pension income & annuity withdrawals.
📌 Increased tax benefits for NPS & PPF contributions.
📌 New provisions for senior citizen tax relief under Budget 2025.
✅ Pensioners benefit from a higher ₹60,000 standard deduction.
✅ Senior citizens above 75 years may continue to get tax-filing exemptions.
✅ Post-retirement investments like SCSS & PPF continue to be tax-efficient.
5. Capital Gains Tax Changes – Relief for Investors?
📌 Possible relaxation in Long-Term Capital Gains (LTCG) tax on equity investments.
📌 Higher tax exemption limits for property & asset sales under Section 54.
📌 Simplified capital gains tax structure expected for retail investors.
✅ Indexation benefits continue for debt mutual funds & property sales.
✅ Tax on equity investments beyond ₹1 lakh remains at 10%.
✅ Stock market & real estate investors benefit from simplified LTCG provisions.
6. How to Maximize Tax Savings in 2025?
📌 Choosing between the old vs. new tax regime – which is better for you?
📌 Investment strategies for reducing tax liability effectively.
📌 How to optimize deductions and rebates to lower taxable income?
✅ Salary restructuring tips to increase tax-free allowances.
✅ Best investment options for tax-free returns (PPF, NPS, ELSS, etc.).
✅ Using tax loss harvesting to minimize capital gains tax.
7. FAQs on Personal Taxation & Budget 2025-26
Q1: Should I opt for the old or new tax regime in 2025?
A: It depends on your income level & deductions. If you claim multiple tax benefits, the old regime is better. If you prefer lower tax rates with no deductions, choose the new regime.
Q2: Has HRA exemption changed in Budget 2025?
A: No, HRA benefits remain the same under the old tax regime.
Q3: What is the standard deduction for salaried employees in 2025?
A: The standard deduction has been increased to ₹60,000, providing additional tax relief.
Q4: Can self-employed individuals claim HRA tax benefits?
A: No, HRA is only available for salaried employees, but self-employed individuals can claim rent deductions under Section 80GG.
8. Conclusion
The Income Tax Bill 2025 introduces taxpayer-friendly reforms aimed at simplifying tax compliance, increasing deductions, and lowering tax liabilities. Whether you’re a salaried professional, business owner, or retiree, proper tax planning can help you maximize savings.
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