Finance Act 2025 Introduces Lower Tax Burden and Higher Exemption Under New Tax Regime

Finance Act 2025 Introduces Lower Tax Burden and Higher Exemption Under New Tax Regime

From FY 2025-26, the new tax system will let people keep more of what they earn. The Finance Act 2025 has simplified income tax slabs, increased the tax-free income limit, and reduced tax rates for middle-income earners. As a result, salaried employees and the middle class will pay less tax on the same salary than before, making the New Tax Regime more beneficial and easier to understand.

The New Tax Regime is designed to be simpler and more rewarding. You give up complicated deductions, but in return you get lower taxes, higher take-home pay, and more freedom to use your money the way you want, making it attractive for more taxpayers to opt in.

Under the new tax regime, individuals with a taxable income of up to Rs 12 lakh  (i.e., an average of Rs 1 lakh per month), excluding income taxed at special rates such as capital gains, will not be required to pay any income tax. For salaried taxpayers, this tax-free threshold effectively increases to Rs 12.75 lakh because of the standard deduction of Rs 75,000.

In the new tax regime, the revised tax rate structure is as follows:

Taxable Income	Tax Rate
0-4 lakh rupees	Nil
4-8 lakh rupees	5%
8-12 lakh rupees	10%
12-16 lakh rupees	15%
16-20 lakh rupees	20%
20-24 lakh rupees	25%
Above 24 lakh rupees	30%

Taxes have been cut, the tax brackets have been simplified to reduce what people actually pay, and anyone earning just over Rs 12 lakh won’t face a sudden jump in tax due to marginal relief.