ITR filing 2025: Not Rs 12.75 lakh, this is the tax-free income for AY2025-26; check details

ITR filing 2025: The NDA government 3.0 introduced a major income tax relief for the salaried class in the Union Budget 2025. Union Minister for Finance and Corporate Affairs Nirmala Sitharaman announced that individuals will not have to pay any income tax on total earnings up to Rs 12 lakh. This translates to an average monthly income of Rs 1 lakh, excluding special rate income such as capital gains. Salaried taxpayers, on the other hand, will have a higher threshold of Rs 12.75 lakh, thanks to a standard deduction of Rs 75,000.

However, taxpayers should note that the changes to the income tax system outlined in Budget 2025 will take effect at the beginning of the new financial year 2025-26 on April 1, 2025. 

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For the upcoming tax season, i.e. assessment year (AY) 2025-26, you will need to file your income tax return for the financial year 2024-25. 

The tax slabs in the New Tax Regime were altered by the Budget 2024, unveiled in July 2024. Effective for the FY 2024-25 (AY 2025-26), individuals earning up to Rs 7 lakh annually are exempt from income tax under Section 87A rebate, as per FM Sitharaman's announcement. This exemption is contingent on forgoing most deductions.

Tax Rebate: Individuals with a total income not exceeding Rs 7,00,000 can avail a tax rebate of up to Rs 25,000. This does not apply to Non-Resident Indians (NRIs), resulting in no tax liability for incomes up to Rs 7,00,000.

Standard Deduction: Salaried employees can now benefit from a standard deduction of Rs 75,000 under the new tax regime.

Deduction for Family Pension: The deduction on family pension received has been raised from Rs 15,000 to Rs 25,000.

NPS Contribution: The deduction limit on employer's contribution to the National Pension Scheme (NPS) stands at 14% for the fiscal year 2024-25.

These changes have enabled salaried employees in the new tax regime to potentially save up to Rs 17,500 in taxes.

The new regime is the default tax regime.  If individuals want to choose the old regime then they have to file Form 10-IEA. The highest surcharge rate is 25% under the new regime as opposed to 37% in the old regime.

New tax regime rates and slabs in FY 2024-25

Taxable income slab (Rs)    Tax rates under new regime
Up to 3,00,000    Nil
From 3,00,001 to 7,00,000    5%
From 7,00,001 to 10,00,000    10%
From 10,00,001 to 12,00,000    15%
From 12,00,001 to 15,00,000    20%
Above 15,00,000    30%

Old Tax Regime

The tax-free limit under the Old Tax Regime is Rs 5 lakh after claiming a rebate of up to Rs 12,500 u/s 87A of the IT Act. If your income surpasses the taxable threshold for FY 2024-25, you have the opportunity to lower your tax burden by investing in qualifying schemes under the previous tax regime. It is important to note that the deadline for making these investments is on March 31, 2025.

Tax slabs under the old tax regime:
 
Income up to Rs 2,50,000: Nil
 
Income from Rs 2,50,001 to Rs 5,00,000: 5 per cent
 
Income from Rs 5,00,001 to Rs 10,00,000: 20 per cent
 
Income above Rs 10,00,000: 30 per cent

Here are a few popular tax-saving investment options available under the old regime that you may consider exploring:

Investment options under Section 80C:

ELSS (Equity Linked Savings Scheme)
Sukanya Samriddhi Yojana (SSY)
Public Provident Fund (PPF)
National Savings Certificate (NSC)
Senior Citizen Savings Scheme (SCSS)
Life Insurance
5-year Post Office Term Deposit
5-year tax-saving fixed deposit

Insurance payment under Section 80D: You can avail deductions for health insurance premiums, up to Rs 25,000 (Rs 50,000 for senior citizens). Deductions are also applicable for expenses related to a disabled dependent.

Additional tax-saving under NPS: You can claim an additional deduction of up to Rs 50,000 under Section 80CCD(1B) by investing in the National Pension System (NPS). This deduction is in addition to the Rs 1.5 lakh limit available under Section 80C.