Archive · 14 Dec 2025
India's 2025 Budget Boosts Tax-Free Salary
India's Finance Minister announced big changes to the new income tax rules in the 2025 Budget.
Starting next year, people who earn up to Rs 12.75 lakh won't have to pay any taxes.
This is because the tax-free limit has been increased, and there are new deductions for things like pensions and employer benefits.
The old tax rules stay the same, so people who save a lot through investments or home loans can still choose that option.
The new rules make taxes simpler and put more money in the pockets of middle-class families.
The new tax regime will be the default for all taxpayers, with widened income slabs and lower tax rates.
The tax rebate has been increased to Rs 60,000, eliminating tax liability for resident individuals earning up to Rs 12 lakh in taxable income.
Salaried workers and pensioners can claim a standard deduction of Rs 75,000, raising the effective tax-free gross salary threshold to Rs 12.75 lakh.
Key deductions include employer contributions to the National Pension System (NPS) and certain tax-free employer benefits.
Popular deductions like Section 80C investments, health insurance, and home loan interest are not allowed under the new regime.
- Who
- Indian taxpayers, especially middle-class individuals, salaried workers, and pensioners
- What
- Changes to the new income tax regime, including widened slabs, lower rates, and increased rebates
- When
- Effective from April 1, 2025 (FY 2025-26, AY 2026-27)
- Where
- India
- Why
- To provide tax relief and boost disposable income for the middle class, particularly in urban areas affected by inflation
- Effective Date
- April 1, 2025 (FY 2025-26, AY 2026-27)
- Tax-Free Income
- Up to Rs 12.75 lakh (Rs 12 lakh taxable + Rs 75,000 standard deduction)
- Rebate Limit
- Rs 60,000
- Standard Deduction
- Rs 75,000 for salaried workers and pensioners
- NPS Contribution Deduction
- Up to 14% of basic salary plus DA (Section 80CCD(2))
- Family Pension Deduction
- Lower of Rs 25,000 or one-third of pension received
- Tax-Free Employer Benefits
- Gratuity (up to Rs 20 lakh), leave encashment (up to Rs 25 lakh), VRS compensation (up to Rs 5 lakh), and reimbursements for work-related expenses
- Capital Gains Exemptions
- Sections 54, 54EC, and 54F
