Income tax slabs changed in budget 2025: How it affects your salary and take-home pay

The Union Budget 2025 brought significant changes to the income tax regime, making it more beneficial for taxpayers. Finance Minister Nirmala Sitharaman announced that under the new tax regime, no income tax will be payable on earnings up to Rs 12 lakh, or up to Rs 12.75 lakh when including standard deductions. This means taxpayers earning Rs 12 lakh will see a direct tax benefit of Rs 80,000, resulting in an effective tax rate of 0%.

Key Highlights of the New Tax Regime:

Full Tax Exemption for Incomes up to Rs 12 Lakh:

Individuals earning between Rs 8-10 lakh will pay a 10% tax initially but can claim a full refund, making their payable tax Rs 0.

Those earning up to Rs 13 lakh will also benefit, considering the standard deduction of Rs 75,000 and an additional marginal relief of around Rs 30,000.

New Tax Slabs for 2025:

Rs 0 to Rs 4 lakh – No tax

Rs 4 lakh to Rs 8 lakh – 5%

Rs 8 lakh to Rs 12 lakh – 10%

Rs 12 lakh to Rs 16 lakh – 15%

Rs 16 lakh to Rs 20 lakh – 20%

Rs 20 lakh to Rs 24 lakh – 25%

Above Rs 24 lakh – 30%

Lower Tax Rates for Higher Incomes:

Previously, a 30% tax was levied on incomes above Rs 15 lakh under both regimes. Now, a new 25% slab applies for those earning between Rs 20 lakh and Rs 24 lakh.

Impact on Taxpayers:

Rs 16 lakh salary → Tax benefit of Rs 50,000, effective tax rate: 7.5%

Rs 18 lakh salary → Tax benefit of Rs 70,000, effective tax rate: 8.8%

Rs 20 lakh salary → Tax benefit of Rs 90,000, effective tax rate: 10%

Rs 25 lakh salary → Tax benefit of Rs 1,10,000, effective tax rate: 13.2%

Rs 50 lakh salary → Tax benefit of Rs 1,10,000, effective tax rate: 21.6%

Changes to TDS on Rent:

The annual TDS exemption limit for rent has been increased from Rs 2.4 lakh to Rs 6 lakh. This move aims to reduce compliance burdens for small taxpayers receiving rental income.

Old Tax Regime Remains Unchanged:

For those sticking with the old tax regime, the slabs remain the same:

Up to Rs 2,50,000 – No tax

Rs 2,50,001 to Rs 7,00,000 – 5%

Rs 7,00,001 to Rs 10,00,000 – 10%

Rs 10,00,001 to Rs 12,00,000 – 15%

Rs 12,00,001 to Rs 15,00,000 – 20%

Above Rs 15,00,000 – 30%

Deductions Under the Old Regime:

The old regime still allows for deductions, including:

Section 80C: Up to Rs 1.5 lakh for investments (PPF, ELSS, LIC, etc.)

Section 80D: Health insurance premiums

Section 24(b): Home loan interest deduction up to Rs 2 lakh

Final Thoughts:

The new tax slabs aim to put more money in the hands of the middle class, encouraging higher spending, savings, and investments. With reduced tax burdens, especially for those earning up to Rs 13 lakh, this Budget focuses on boosting economic activity and household finances.