According to CBDT, no rebate will be available on income from capital gains or lotteries or any other income on which special rates have been provided in the Income-tax Act, 1962. The rebate of ₹60,000 on income up to ₹12 lakh will be available only on the tax payable as per the proposed slabs of the new tax regime for FY 2025-26.

According to CBDT, the tax liability on ₹12.1 lakh income by way of slabs is ₹61,500. However, marginal relief ensures that the tax payable by a person having an income of ₹12.1 lakh is only ₹10,000.

In the new regime under section 115BAC(1A), marginal relief is available to only resident individuals who have income marginally above ₹12 lakh.

For example, for a person having an income of ₹12.1 lakh, tax works out to be ₹61,500 marginal relief. However, due to marginal relief, the amount of tax to be paid is ₹10,000 only.

New tax slab impact: Individuals having an annual income of ₹24 lakh or more can hope to save ₹1.10 lakh in income tax, while those earning ₹12 lakh will have to pay no tax, benefiting to the tune of ₹80,000 from the next financial year under the new regime.

The new Income-tax bill will be clear and direct in text with close to half of the present law, in terms of both chapters and words, according to Finance Minister Nirmala Sitharaman. She has proposed to introduce the new Income-tax bill next week.

In her Budget speech, the FM announced that the new income-tax bill will carry forward the spirit of “Nyaya”.

The new bill will be clear and direct in text with close to half of the present law, in terms of both chapters and words. It will be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation.

"The proposed tax reforms, including TDS rationalization and increased thresholds for senior citizens, will empower taxpayers and promote greater financial inclusion. Collectively, these initiatives lay the foundation for a robust insurance ecosystem, supporting the government's vision of 'Insurance for All' by 2047,” says Naveen Chandra Jha, MD & CEO, SBI General Insurance.

"No income tax payable up to income of ₹12 lakh other than capital gains. This is a huge step towards ensuring relief to middle class. A big boost expected to give impetus to consumption," says Kumarmanglam Vijay, Partner, JSA Advocates & Solicitors.

"Zero tax upto ₹12 lakh is expected to be transformative and to provide some relief to the middle class, that was observing this closely given the current inflation. Leaving more monies with the middle class, if well directed, this should help boost personal investments as well as augur well with the economy."

“The Finance Minister delivered a growth-oriented budget while staying firmly on the path of fiscal consolidation pegging the fiscal deficit for FY 26 at 4.4%. A massive ₹1 lakh crore in personal tax relief directed at the middle class, will boost consumption, and enable households to invest in their financial security. Initiatives around channelizing credit to the MSME sector with focus on labour intensive manufacturing, facilitating investments, smoothening the processes in the exports arena, reforms around the ease of doing business with an overall emphasis on minimizing onerous regulations augur well for the economy and its participants," says Venky Iyer, Managing Director and Chief Executive Officer at Tata AIA Life Insurance on the Union Budget.

Income from ULIPs with annual premiums exceeding ₹2.5 lakh will be taxed as capital gains and non-ULIPs will be taxed as income from other sources. The amendment will be effective from April 1, 2026.

CA Dr Suresh Surana explains what has changed below:

Section 10(10D) provided exemption for any sum received under a life insurance policy, including bonuses subject to below conditions.

• premium payable for any of the years during the terms of the policy (life insurance or ULIP) issued on or after 01.04.2012 should not exceed 10% of the actual capital sum assured; and

• amount of premium or aggregate amount of premium payable during the term of such policy or policies should not exceed ₹2.5 lakh for Unit Linked Insurance Policy or ₹5 lakh for policies issued after certain dates.

If the above conditions are not fulfilled, the sum received under insurance policy may be charged to tax as capital gains (for unit-linked insurance policy (ULIP)) or income from other sources income (for policy other than ULIP)

Clarification on Tax Treatment of ULIPs and Non-ULIPs

In the present provisions, in the case of ULIP, even where payable premium exceeded 10% of the sum assured, the sum received on redemption was not being charged to tax as ‘capital gain’ under sub-section (1B) of section 45(1B). Even though it was not exempt, there was ambiguity regarding the head of chargeability. The current amendment has now made the tax treatment given to all ULIP policies consistent.

Thus, if exemption under Section 10(10D) does not apply, the sum received under both ULIP and other insurance policy shall be chargeable to tax under the head ‘capital gains’ or ‘income from other sources’, respectively.

This move is expected to streamline the tax treatment of ULIPs and other insurance policies and help taxpayers better understand how to plan their finances and tax obligations around life insurance investments. By offering more clarity regarding the tax treatment of life insurance policy proceeds, including the introduction of capital gains taxation for ULIPs in specific cases, the government aims to assist taxpayers in making informed decisions about their financial planning.

Finance Minister Nirmala Sitharaman today increased the threshold limit for TDS deduction on interest on fixed deposits for senior citizens rom ₹50,000 to ₹100,000.

"This would avoid blockage of funds in the form of interest income for senior citizens who generally prefer to save their money in fixed deposits. This would definitely make FDs more attractive for senior citizens and thereby would avoid the hassle of filing returns for senior citizens (having only income from FD interest upto ₹100,000) for purpose of claiming of tax refunds on account of TDS on interest income," says CA Dr Suresh Surana.

Budget 2025 reduced the number of TDS rates and various thresholds.

"I propose to rationalize Tax Deduction at Source (TDS) by reducing the number of rates and thresholds above which TDS is deducted. Further, threshold amounts for tax deduction will be increased for better clarity and uniformity," the finance minister said. Check new rates in previous update.

Source: Union Budget 2025

The Finance Minister said that "the limit for tax deduction on interest for senior citizens is being doubled from the present ₹50,000 to ₹1 lakh. The TDS threshold for other citizens has been increased to ₹50,000 from ₹40,000.

This means, there will be no TDS on interest income up to ₹1 lakh for senior citizens and up to ₹50,000 for general citizens under section 194A.

The most significant announcement in Budget 2025 about increasing the income tax exemption threshold. Individuals earning up to ₹12 lakh annually (excluding capital gains) will now be completely exempt from income tax - an impressive rise from the previous threshold of ₹7 lakh.

"This landmark move is set to provide much-needed financial relief to millions of households enhancing their disposable income. In addition to this pivotal exemption, the Finance Minister also announced revision in tax slabs. As part of the new regime, individuals earning ₹24 lakhs and above will save up to INR 1.10 lakh," says CA Deepesh Chheda, Partner, Dhruva Advisors LLP

The Union Budget 2025-26 has extended the deadline for taxpayers to file updated income tax returns (ITR-U) from 24 months to 48 months from the end of the relevant assessment year, allowing more time for voluntary compliance.

Sitharman said that the objectives of her proposals for direct taxes were: personal Income Tax reforms with special focus on middle class; rationalisation of TDS/TCS for easing difficulties; encouraging voluntary compliance; reducing compliance burden; ease of doing business; and employment and investment

Individuals must file their ITR if their income exceeds the basic exemption limit of ₹2.5 lakh (for the old regime) or ₹4 lakh (for the new regime).

As per the Budget Speech, the rebate for the resident individual under the new regime has been increased in such a way that they do not pay tax if their total income is up to ₹12,00,000.

Earlier, resident individuals with total income up to ₹7,00,000 did not pay any tax due to rebate under the new tax regime.

As expected, the Finance Minister announced no change in the old regime. The new slab and rates announced for taxpayers in the new regime are likely to make the old regime irrelevant for many taxpayers. Already, over 70% taxpayers have switcherd to the new regime, as per the Income-tax Department's data.

For taxpayers with up to ₹12 lakh income, other than special rate interest such as capital gains, the finance minister said that tax rebate is being provided, in addition to slab rate restructure, in such a manner that no tax will be payable by them for income up to up to ₹12 lakh.

FM says the following will be the new tax slab and rates in the new regime, that will make income up to ₹12 lakh tax-free, if the individual doesn't have special interest income.

Big news! No income-tax payable on up to ₹12 lakh, says FM

For Senior citizens' interest income, TDS threshold on interest income from deposits has been increased to ₹1 lakh from ₹50,000, says Finance Minister.

New Income Tax Bill will carry forward the spirit of "nyay". It will be nearly 50% less in terms of words. The simplified new tax bill will help achieve good governance and reduce litigations.

Finance Minister Nirmala Sitharaman says the FDI limit for the Insurance Sector will be raised from 74 to 100 percent. This enhanced limit will be available for those companies which invest the entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified.

FM Nirmala Sitharaman says an upgraded central KYC registry system will be rolled out in 2025. It was proposed in the previous budget.

FM says that the new Income Tax bill will be introduced next week. The FM had proposed a revamp of the existing income tax law in the last budget.

FM proposes following measures for Gig workers

• Identity cards for Gig Workers

• PM Jan Aarogya (PM-JAY) registration

FM Sitharaman proposes a new Fund of Funds for startups.

• Fresh contribution of another ₹10,000 crore, in addition to existing government contribution of ₹10,000 crore

• New Scheme for 5 lakh Women, Scheduled Castes and Scheduled Tribes first-time entrepreneurs

Finance Minister Nirmala Sitharaman is likely to announce tax relief for the middle-class and the salaried taxpayers. The tax cuts may be in the new tax regimes, experts say.

FM proposes anew scheme to provide loans up to ₹5 crore for women entrepreneurs

Nirmala Sitharaman says India's economy is the fastest-growing among all major global economies. "Our development track record of the past 10 years and structural reforms have drawn global attention. Confidence in India’s capability and potential has only grown in this period. We see the next five years as a unique opportunity to realize ‘Sabka Vikas’, stimulating balanced growth of all regions."

At the start of the speech, the Finance Minister talked about the proposed development measures. She said the proposed development measures in Budget2025 span 10 broad areas focusing on the poor, youth, farmers and Women

It's the time now! Finance Minister Nirmala Sitharaman has started the Budget speech. Stay tuned for real-time updates on tax changes.

Budget Live: We don't believe that all of the following changes would be announced by the finance minister. As we wait in anticipation, here's a list of 10 top suggestions by tax experts that the finance minister may have look at. We have our fingers crossed

1. Income-tax slab and rates
2. Standard Deduction hike
3. Health insurance deduction in new regime and limit hike
4. National Pension System deduction in new regime
5. Joint taxation of married couples
6. Home Loan deduction in new regime 7 House Rent Allowance in new regime
7. Tax relief on term deposits
8. Capital Gains tax relief for long-term investments
9. TDS/TCS change and relief for NRIs

KPMG suggests the Government may reconsider allowing deductions for interest on self-occupied housing loans even under the new default tax regime or enhancing the deduction in the old tax regime to at least ₹3 lakh.