The year 2025 is set to be remembered as a landmark year in India’s tax landscape, with the country witnessing its biggest overhaul of income tax rules in decades. Two major themes dominated the year: higher take-home pay for individuals and clearer, simplified tax laws for easier compliance.
For millions of salaried taxpayers, the upgraded new income tax regime emerged as the biggest shift. Under the revised structure, income up to ₹12.75 lakh — including the standard deduction — effectively became tax-free. Alongside this, the government unveiled the New Income Tax Act, 2025, which will replace the old Act starting 1 April 2026, aiming to create a cleaner and more understandable legal framework.
The year also brought lighter TDS and TCS rules, simplified slabs, and expanded avenues for filing updated returns. Here’s a quick recap of the top tax changes that shaped 2025.
Top 9 income tax changes of 2025
1. Higher tax-free income
Under the new tax regime:
- Income up to ₹12 lakh is tax-free
- With the ₹75,000 standard deduction, salaried individuals enjoy a tax-free limit of ₹12.75 lakh
2. New income tax slabs
The government introduced new slabs to reduce the middle-class tax burden under the new regime:
| Income Range (₹) | Tax Rate |
|---|---|
| 0 – 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% |
This effectively ensures no income tax up to ₹12 lakh, with progressive taxation for higher incomes.
3. New Income Tax Act, 2025
A new IT Act was introduced to simplify tax laws.
- It will come into effect on 1 April 2026
- Aims to reduce ambiguity and increase clarity for taxpayers
4. TDS rationalisation
Higher TDS thresholds across several categories mean fewer deductions for individuals and small businesses:
- Interest on securities (193): ₹10,000
- Interest (other than securities)
- Senior citizens: ₹1,00,000
- Banks/post office: ₹50,000
- General cases: ₹10,000
- Dividends (194): ₹10,000
- Mutual funds (194K): ₹10,000
- Lottery and games (194B/194BB): ₹10,000
- Insurance commission (194D): ₹20,000
- Brokerage/commission (194G/194H): ₹20,000
- Rent (194-I): ₹50,000 per month
5. Bigger rebate under Section 87A
- New regime rebate increased from ₹25,000 to ₹60,000
- Old regime rebate stays ₹12,500
6. More time to file updated returns
- Updated return window increased from 12 months to 48 months
- Taxpayers now have 4 years after the assessment year to correct returns
7. New ULIP taxation rules
From FY 2025–26 onward:
- ULIPs with premiums over ₹2.5 lakh per year or exceeding 10% of the sum assured
→ Taxed like capital gains- STCG: 20%
- LTCG: 12.5%
- ULIPs below this limit remain tax-free under Section 10(10D)
8. Higher TDS limits across key categories
The government increased limits to reduce unnecessary TDS:
- Rent: ₹50,000/month
- Interest for senior citizens: ₹1,00,000
- Dividends & MF units: ₹10,000
- Lottery winnings: ₹10,000
9. TCS changes
- Foreign remittances & tours (LRS): limit raised to ₹10 lakh
- Education via loan under LRS: No TCS
- Purchase of goods (206C(1H)): No TCS
