3 reasons why you will have more money in hand from April 1, New Financial Year 2025-26

The New Financial Year 2025-26, starting from April 1, 2025, is set to boost the disposable income of numerous taxpayers across the country, thanks to various policy changes announced recently. This article explains three key reasons behind this development.

Tax slab and rate changes

For salaried employees, the tax-free income limit will be ₹12.75 lakh due to ₹75,000 standard deduction under the new regime. Employers will collect zero advance tax from employees whose taxable salary is not more than ₹12.75 lakh. Hence, the monthly in-hand pay of such employees will increase.

Repo rate cut

In February, the RBI announced to reduce the repo rate by 0.25%. Lower repo rate means lower interest rate on repo rate-linked floating loans, hence more money in the hands of borrowers.

Banks have already started passing on the benefit of lower repo rate to borrowers by reducing their interest rates on loans such as home loans and auto loans. Going forward, it is expected that the RBI may further reduce repo rate as inflation has also eased.

According to SBI Research, the RBI may reduce the repo rate by another 0.75% in FY 2025-26.

"Going ahead, CPI inflation may come down to 3.9% in Q4 FY25 and average to 4.7% in FY25. We expect FY26 inflation may come to 4.0-4.2% and core inflation in the range of 4.2% to 4.4%. With benign inflation this month and going forward, we expect a cumulative rate cut over the cycle could be at least 75 basis points, with successive rate cuts in next policy April and August 2025. With an intervening gap in Aug’25, the rate cuts cycle could restart from Oct’25," SB Research said in a report dated March 12, 2025.

Higher TDS thresholds

TDS will not be deducted on deposits till ₹50,000 interest income for general citizens and ₹1 lakh for senior citizens. Earlier these limits were ₹40,000 for general citizens and ₹50,000 for senior citizens.

In the case of rent, TDS will not be deducted if the rent per month or a part of the month is ₹50,000 (₹6 lakh/year). Earlier this limit was ₹2.4 lakh/per year.

For those visiting abroad, TDS from remittance under the RBI's Liberalised Remittance Scheme (LRS) will not be deducted by authorised dealers till ₹10 lakh. Earlier, the TDS threshold was ₹7 lakh.