What Are the New 7 Income Tax Rules for FY 2025-26?
The Finance Bill 2025 has introduced several new income tax rules that will take effect from April 1, 2025, impacting salaried employees and individual taxpayers. These changes include enhanced tax rebates, revised tax slabs, new TDS thresholds, and updates to ULIP taxation. Whether you’re a salaried employee, a self-employed individual, or an investor, these changes could have a significant impact on your financial planning for the new financial year.
But what are these 7 income tax rules that will change? Let’s dive deeper to understand the implications of these changes and how they can affect you.
1. Increased Tax Rebate Under Section 87A
Wondering if you qualify for a tax rebate under the new regime? You’re in luck!
From April 1, 2025, the tax rebate under Section 87A of the Income Tax Act, 1961 will increase significantly.
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Old Regime: ₹25,000 for taxable income up to ₹7 lakh.
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New Regime: ₹60,000 for taxable income up to ₹12 lakh.
Who Benefits?
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Salaried employees with taxable income up to ₹12 lakh.
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Due to the ₹75,000 standard deduction, salaried individuals earning up to ₹12.75 lakh will effectively pay zero tax.
Note: This change applies only under the new regime. The rebate under the old regime remains unchanged.
2. New Tax Slabs and Rates for FY 2025-26
Starting April 1, 2025, new tax slabs and rates will apply under the revised tax regime.
Key Changes:
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Basic Exemption Limit: Increased from ₹3 lakh to ₹4 lakh.
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Highest Tax Rate: 30% rate applicable for income exceeding ₹24 lakh.
Here’s a quick look at the updated tax slabs:
| Income Range (₹) | New Regime Rate (%) |
|---|---|
| 0 – 4,00,000 | Nil |
| 4,00,001 – 7,00,000 | 5% |
| 7,00,001 – 12,00,000 | 10% |
| 12,00,001 – 24,00,000 | 20% |
| Above 24,00,000 | 30% |
Important: No changes will apply to the old tax regime.
3. Increased TDS Thresholds: Higher Limits for Various Transactions
If you’ve been worried about TDS (Tax Deducted at Source) being deducted on small transactions, there’s good news!
From April 1, 2025, the minimum amount above which TDS/TCS will be deducted is increasing.
Key Changes:
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TDS on Bank Deposits: Increased from ₹40,000 to ₹50,000.
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Higher Thresholds: Applicable to other financial transactions such as property sales, dividends, and insurance commissions.
Why This Matters:
This change is expected to ease compliance and provide relief to taxpayers, especially senior citizens and small deposit holders.
4. Change in Definition of Perquisites for Employees
Big relief is coming for salaried employees in terms of perquisites.
From April 1, 2025, certain amenities and benefits provided by employers will no longer be treated as perquisites.
What’s Changing?
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Travel Abroad for Medical Treatment: Expenses incurred by the employer for an employee’s or their family’s medical treatment outside India will not be treated as a perquisite.
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Other Benefits: Certain amenities provided by employers will be exempt from being taxed as perquisites.
Impact:
Employees will save more on tax while availing such benefits.
5. ULIP Taxation Changes: New Rules to Consider
If you’ve been investing in ULIPs (Unit Linked Insurance Plans), there’s a crucial change you should be aware of.
New Taxation Rule:
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Premium Threshold: ULIPs with an annual premium exceeding ₹2.5 lakh will now be classified as capital gains.
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Taxation Rate: Gains will be taxed under Section 112A of the Income Tax Act.
Pro Tip:
Evaluate your ULIP investments carefully to determine their tax impact.
6. Additional Tax Savings Through NPS Vatsalya
Thinking of securing your child’s future? Here’s a great tax-saving opportunity!
Starting April 1, 2025, taxpayers contributing to the NPS Vatsalya account of their children can claim an additional deduction of ₹50,000 under the old tax regime.
Who Can Benefit?
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Salaried employees.
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Self-employed taxpayers.
Why It’s Important:
This deduction is over and above the existing limit of ₹1.5 lakh under Section 80C, making it an attractive investment option.
7. Simplified Annual Value of Self-Occupied Property
From April 1, 2025, there’s a significant relaxation in the treatment of self-occupied properties.
New Rule:
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Taxpayers can now claim nil annual value on up to two properties, irrespective of whether they are self-occupied or not.
What Does This Mean?
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Homeowners with multiple properties can enjoy tax relief without worrying about the deemed rental income from the second property.
Additional Changes Worth Noting
Apart from these 7 income tax rules, a few more changes are worth mentioning:
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DigiLocker Access: You can now authorize your nominee to access equity shares and mutual fund statements.
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Credit Card Benefits: Some credit cards are altering their benefits in the new financial year.
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Assured Pension Scheme for Government Employees: Government employees will get the option to opt for an assured pension scheme under NPS.
FAQs About the 7 Income Tax Rules for 2025-26
1. Will the increased rebate under Section 87A apply to both old and new regimes?
No, the increased rebate applies only to the new regime. The old regime’s rebate remains unchanged.
2. What is the new basic exemption limit for FY 2025-26?
The new basic exemption limit is ₹4 lakh under the new regime.
3. How does the revised ULIP taxation impact policyholders?
ULIPs with annual premiums exceeding ₹2.5 lakh will now be taxed as capital gains under Section 112A.
4. Can I claim a deduction for contributing to the NPS Vatsalya account?
Yes, you can claim an additional deduction of ₹50,000 under the old tax regime.
5. What is the new TDS threshold for bank deposits?
The TDS threshold for bank deposits has been increased from ₹40,000 to ₹50,000.
6. Are perquisites like employer-paid foreign travel for medical treatment taxable?
No, these expenses will not be treated as perquisites from April 1, 2025.
7. Can I claim nil value on multiple properties?
Yes, up to two properties can now be treated as self-occupied with nil annual value.
8. Are the new tax slabs applicable to all taxpayers?
No, the new tax slabs are applicable only under the new regime.
9. Do the changes affect Section 80C deductions?
No, Section 80C deductions remain unchanged for FY 2025-26.
10. When do these new income tax rules come into effect?
All changes will come into effect from April 1, 2025, for the financial year 2025-26.
Final Thoughts: Plan Ahead for FY 2025-26
With these 7 income tax rules set to change from April 1, 2025, it’s crucial to realign your financial strategy to maximize tax benefits. Whether it’s claiming higher rebates, restructuring ULIP investments, or contributing to NPS Vatsalya, staying informed can help you save significantly on taxes.
Prepare ahead and make the most of these tax-saving opportunities!
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