GIFT City Funds
The new budget for the 2025-2026 has incorporated a significant change to the tax slabs under the new and improved tax regime. It aims towards simplifying the tax structure as well as lifting off considerable burden from the middle-income labelled tax payers.
What is New?
The important updates include:
- The tax-exemption limit under the new regime has been increased to ₹4 Lakh. Incomes up to this level face no tax.
- The rebate that comes under Section 87A had been enhanced, meaning taxpayers with an income up to ₹12 Lakh might pay zero tax. (this includes standard deductions and salaried cases)
- The single bracket which was “30% above X” has been divided into refined steps for the purpose of distributing tax burden more gradually: Example includes:
- ₹4,00,001 to ₹8,00,000 → 5%
- ₹8,00,001 to ₹12,00,000 → 10%
- ₹12,00,001 to ₹16,00,000 → 15%
- ₹16,00,001 to ₹20,00,000 → 20%
- ₹20,00,001 to ₹24,00,000 → 25%
Income above ₹24,00,000 → 30% Source: Clear Tax
Taxable Income | Tax Rate |
Up to ₹4,00,000 | Nil |
₹4,00,001 – ₹8,00,000 | 5% |
₹8,00,001 – ₹12,00,000 | 10% |
₹12,00,001 – ₹16,00,000 | 15% |
₹16,00,001 – ₹20,00,000 | 20% |
₹20,00,001 – ₹24,00,000 | 25% |
Above ₹24,00,000 | 30% |
*These rates only apply under the new tax regime, unless you want to adhere to the old tax regime.
Implications for Tax Payers:
- In simpler terms if your annual income falls right below ₹12 Lakh then you might pay zero tax in the end.
- Incomes that range between ₹12 Lakh and ₹24 Lakh, you will be liable to pay progressively higher rates rather than spontaneously jumping at a high rate.
- The new regime is ideal for middle-income earners as well as salaried individuals who previously experienced a significant jump between tax rates.
- For high-income earners also, the refinement of tax brackets enables them to plan taxes more effectively
Things to Consider before Choosing A Regime
- For those familiar and comfortable with the previous tax regime, it still exists as an option.
- If you possess enough tax savings investments, deductions as well as exemptions then the old regime will benefit you.
- If simplicity and less calculations is your “go-to” then the new regime is for you.
Tips for FY 2025-2026
- Review the expected taxable income that you will be getting for the year
- Estimate and compare the taxes, both under the new and old regime.
- If income is below ₹12 Lakh, then the new regime might be more advantageous as it might offer zero tax liability.
- If you possess higher income then it is best to plan investments, deductions and exemptions accordingly before choosing.
The tax regime for the FY 2025- 2026, provides more relief, as well as more flexibility along with a gradually increased tax rate for a specific range of incomes, which translates to more people paying less tax and planning becomes fluid instead of feeling like a chore.
Irrespective of your status as a salaried individual, self-employed or as an NRI, it pays off if you review the regime which best suits your investor profile.
