What tax rates did Budget 2025 set?
Budget 2025 set the new-regime rates for income of FY 2025-26, assessed in AY 2026-27. Tax is nil up to ₹4 lakh, then 5, 10, 15, 20, and 25 percent through the bands up to ₹24 lakh, and 30 percent above ₹24 lakh. A rebate leaves tax at nil on income up to ₹12 lakh that is taxed at these normal rates.
What are the new-regime slabs?
- Up to ₹4 lakh: nil
- ₹4 lakh to ₹8 lakh: 5 percent
- ₹8 lakh to ₹12 lakh: 10 percent
- ₹12 lakh to ₹16 lakh: 15 percent
- ₹16 lakh to ₹20 lakh: 20 percent
- ₹20 lakh to ₹24 lakh: 25 percent
- Above ₹24 lakh: 30 percent
These are not the July 2024 bands, which stopped at a 30 percent rate above ₹15 lakh. That year is on the Budget 2024 page. The old regime is unchanged by this table. Section 80C still needs the old regime, on the 80C page.
Who pays no tax up to ₹12 lakh?
Section 87A, in the new regime, gives a rebate of up to ₹60,000, so income up to ₹12 lakh taxed at normal rates pays no tax. The rebate does not cover income taxed at a special rate, such as some capital gains. A salaried person also has a standard deduction of ₹75,000 under the new regime, so salary income up to ₹12.75 lakh can fall within the same nil result. That arithmetic is the rebate plus the standard deduction. It is not a separate exemption of ₹12.75 lakh for every kind of income.
Up to two self-occupied houses can be taken at a nil annual value. The cap on interest for a self-occupied house remains the one on the home-loan page.
How long is an updated return open?
An updated return under section 139(8A) may be filed up to 48 months from the end of the assessment year, where the section allows it. The additional tax rises with the delay: 25 percent up to 12 months, 50 percent from 12 to 24 months, 60 percent from 24 to 36 months, and 70 percent from 36 to 48 months. It is not a way to file once assessment for that year has been barred by the section.
What else did that Finance Act change?
Several TDS thresholds were raised, including interest under section 194A, professional fees under section 194J to ₹50,000, and dividend under section 194 to ₹10,000. The higher deduction rules in sections 206AB and 206CCA, which applied when the payee had not filed a return, were omitted. A missing PAN is a different, still-existing reason for a higher rate.
MSME ceilings from 1 April 2025 are on the MSME page: micro ₹2.5 crore of investment and ₹10 crore of turnover, small ₹25 crore and ₹100 crore, medium ₹125 crore and ₹500 crore. Registration still carries no fee and does not cut the tax rate.
Frequently asked questions
Four questions cover the old regime, capital gains, the 2024 slabs, and MSME ceilings.
Do these slabs apply to the old regime?
No. They are the new-regime rates for FY 2025-26. The old regime keeps its own slabs and the deductions the new regime does not allow.
Does the ₹12 lakh rebate cover capital gains?
No. The rebate under section 87A is for income taxed at normal rates. Income taxed at a special rate is outside it.
Are the July 2024 slabs still used for this year?
No. Those slabs were for FY 2024-25. They are on the Budget 2024 page.
Did the MSME limits change with this Budget?
Yes. From 1 April 2025 the ceilings are the ones on the MSME page: micro ₹2.5 crore and ₹10 crore, small ₹25 crore and ₹100 crore, medium ₹125 crore and ₹500 crore.
Sources
The slabs and the rebate are the Finance Act, 2025, for FY 2025-26.