What’s new? 2025 Tax Deductions Explained Simply

What new tax regime 2025, what’s new about it, and what are changes do you have an idea? As per the latest Union Budget of 2025, a plethora of changes can be easily noticed that have a direct impact on the manner in which taxpayers will organize their finances for the next financial year. Ranging from the re-aligned income tax slabs for AY 2025-26 to the new tax regime’s standard deductions and new allowances, what can be seamlessly noticed is a simplification of compliances and greater clarity. The revised income tax slabs were announced by our current Finance Minister Nirmala Sitharaman in her 2025 Union Budget speech. Whether you’re a salaried employee, business owner, or a senior citizen, understanding these changes is crucial to optimize your tax planning.

In this article, we’ll try to provide you with a comprehensive overview, breakdown, and budget 2025 tax deductions. Let’s take a look at the standard deduction for AY 2025-26, dive into the tax slab 2025, and cover what the new tax regime deductions offer.

Income tax slab for FY 2025-2026

Income Tax slab changes mentioned in the Union Budget of 2025 are one of the most awaited announcements. The budget of 2025 revised or new tax slab rates under section 115 BAC, which is the New Tax Regime or also can be mentioned as the Default Tax Regime. This new Income Tax Slab for AY 2025-26 has been revised to ensure that individuals save more money and increase their spending capacity. Below is a quick look at the new tax slab of 2025 under the new tax regime, which remains the default unless opted out. Let the figures explain the new slab.

While following or going through this new slab, you also need to understand the fact that the general exemption limit under the new tax regime has been raised from ₹2.5 lakh to ₹3 lakh. This provides direct relief for low-income earners. This step in the near future can make the low-income sturdy enough to upgrade their buying or purchase power.

However, the old tax regime continues to be available in the market mainly for those individuals who wish to claim exemptions as well as deductions not permitted under the new tax regime.

Increased rebate under Section 87A in the new regime

Increased rate of rebate under Section 87A – what does that mean? Let’s take a look. Section 87A in the new regime explains that the rebate under this specific Section for taxpayers opting for the New Tax Regime has been raised to RS. 60,000 from Rs. 25,000.

With the aid of this amendment or revision, individual taxpayers can now receive tax-free income of Rs.12 lakhs under the New Tax Regime.

That is, if your income is Rs. 12 lakhs or less and you’re under the new regime, you won’t have any tax liability. There is also rebate mentioned for individuals choosing the Old Tax Regime remains at Rs. 12,500.

Tax Relief in Budget 2025 – A summary of deductions & reliefs

The Budget 2025 tax deductions that were introduced or continued were as follows:

A. Section 87A Rebate (New Regime)

Those with income up to Rs. 7 lakh per annum under the new tax regime will still get a full-fledged tax rebate, essentially paying no tax.

B. Standard tax deduction

Rs. Fifty thousand standard deduction for all salaried and pensioned individuals. Both old and new tax regimes have it available.

C. Deduction for family pension

A deduction of Rs. Fifteen thousand or 1/3rd of the family pension received, whichever is lower of the two still exists.

D. NPS deduction under Section 80CCD(2) (Corporate Contributions)

In this segment deduction of up to 10% of basic pay for private sector employees is mentioned.

Up to 14% for central government employees.

This provision is available in the new tax regime too.

These are the primary pillars of new tax regime deductions.

TDS threshold under the new regime

In the recent budget followed by income tax rules significant amendments to provisions of TDS will rightly come into effect from 1 April 2025. One of the major recommendations or considerations is raising the threshold limits of different TDS sections for individuals along with different business concerns or organizations. Significantly, the Rs. 50,000 threshold limit applicable for TDS on interest incomes earned by senior citizens has now been increased to an amount of Rs.1 lakh. Comparable hikes have also been done in respect of thresholds with regard to rental as well as commission payment.

Which regime to opt for – A comparative analysis

Standing at this point you might be thinking which tax slab to choose, or which one can perfectly suit your income and expenditure parameters. If the case is so, here is a comparative analysis between the Old tax regime with the New tax deductions 2025. To understand or to make the concept clear take a look at the below mentioned chart.

More key points from Budget 2025

Apart from income tax brackets and deductions, the 2025 budget tax cuts also address wider tax changes and perks:

1. Seamless tax siling – The government is venturing to introduce pre-filled tax return forms to make it simple and easier for people with salaries, to file their taxes. These forms will require certain details like your income, deductions, and TDS info.
2. Older adults – People over 75 years don’t need to file income taxes if they receive money from different schemes like pensions and interest as long as the bank takes out the taxes. They can now seamlessly utilize the standard deduction process as well as get money back under Section 87A.
3. Higher TDS Limit – A higher limit of TDS is being set for interest income for older adults, the TDS cutoff for interest from banks or post offices stays at Rs. 50,000.

To know more about financial aspects, investments, and taxes keep reading Minty Cents. We help you to keep track of the contemporary financial market.

Disclaimer – This blog is for informational purposes only. Before conducting any investment, it is advisable to carry out comprehensive research.

PAA (People Also Ask) About 2025 Tax Deductions

What about income tax in Budget 2025?

The recent Union Budget of 2025 retained existing slabs of tax under the new regime but provided higher rebate limits. No major changes were made to personal income tax rates or its current structures.

 What is the tax exemption for 2025?

Under the new regime, income up to Rs. 7 lakh is tax-free due to a rebate added in the recent regime. Under the old income tax slab, the basic exemption remains at ₹2.5 lakh for individuals below 60 years of age.

Will the 80C limit increase in 2025?

No change was announced in the 2025 Budget in respect of the Section 80C limit enhancement. It remains capped at Rs. 1.5 lakh following the old regime for eligible investments and expenses.

What is the 80GGC deduction income tax message?

Section 80GGC allows a full deduction for donations made to political parties or electoral trusts. However, one can avail the deductions only if payment is made by non-cash method.

What is an 80GGC deduction?

Section 80GGC caters to complete tax deductions for contributions to political parties or electoral trusts by individuals only.

What is the standard deduction for 2025/26?

For the FY 2025–26, the standard deduction remains Rs.50,000 for salaried individuals as well as pensioners under both tax regimes. This helped the common public a lot by catering basic relief against taxable salary or pension income.

What is the tax exemption for 2025?

In FY 2025, income up to Rs. 7 lakh is exempt under the new tax regime. However, the old tax policy exemption limit stays at ₹2.5 lakh.

What is the new income tax law for 2025?

The new tax slab remains the default in 2025 with lower slab rates and no exemptions. Taxpayers can still opt for the old regime.

Raaghav Gupta

Raaghav Gupta is a personal finance expert specializing in investing, stocks, cryptocurrency, ETFs, and budgeting. With years of experience covering everything from savings and loans...

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