New Income Tax Regime 2025: Key Features, Benefits & Standard Deduction Explained

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The Indian government has introduced significant changes to the New Income Tax Regime in 2025, making it more attractive for taxpayers. The latest Union Budget has revised tax slabs, increased the standard deduction, and introduced additional benefits aimed at reducing tax liability and increasing disposable income.

This article will explain all the key features of the New Income Tax Regime 2025, how it impacts taxpayers, and why it may be a better choice compared to the old regime.

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Understanding the New Income Tax Regime 2025

The New Income Tax Regime was originally introduced to simplify taxation by offering lower tax rates while removing many deductions and exemptions available under the old regime. However, taxpayers were given the option to choose between the two.

In 2025, the government has further improved the New Income Tax Regime by increasing tax-free income limits, revising tax slabs, and enhancing the standard deduction. These changes aim to reduce the tax burden on salaried individuals and small business owners, making the new regime a more attractive choice.

Let’s look at the latest tax slabs under the New Tax Regime 2025.

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Revised Income Tax Slabs for FY 2025-26

Under the new structure, the income tax slabs have been adjusted to provide better savings for individuals and professionals. Here are the updated slabs for FY 2025-26:

• Income up to ₹4 lakh – No tax (Previously, the exemption limit was ₹3 lakh)
• ₹4 lakh to ₹8 lakh – 5% tax
• ₹8 lakh to ₹12 lakh – 10% tax
• ₹12 lakh to ₹16 lakh – 15% tax
• ₹16 lakh to ₹20 lakh – 20% tax
• ₹20 lakh to ₹24 lakh – 25% tax (New slab introduced in Budget 2025)
• Above ₹24 lakh – 30% tax (Previously, 30% applied to income above ₹15 lakh)

What This Means for Taxpayers

With these revised tax slabs, individuals earning up to ₹12 lakh annually will not have to pay any income tax after factoring in the increased standard deduction.

The increase in the exemption limit from ₹3 lakh to ₹4 lakh means lower-income individuals won't have to pay any tax at all, providing additional savings.

Additionally, the introduction of a new 25% tax slab for incomes between ₹20 lakh to ₹24 lakh helps distribute tax liability more evenly, preventing sudden tax jumps.

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Standard Deduction Increased in 2025

One of the most significant changes in the 2025 tax reforms is the increase in the standard deduction.

• Standard Deduction increased from ₹50,000 to ₹75,000
• Salaried individuals and pensioners can claim this deduction without additional documentation
• This reduces taxable income and helps in saving more tax

With this change, a person earning ₹12.75 lakh annually will effectively pay zero tax after considering the standard deduction.

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How Much Tax Will You Save? (Tax Comparison)

The revised tax slabs and higher standard deduction lead to substantial tax savings. Let’s see some examples:

• Income of ₹7.5 lakh → Tax under old regime: ₹65,000 | Tax under new regime: ₹0
• Income of ₹10 lakh → Tax under old regime: ₹1,17,000 | Tax under new regime: ₹0
• Income of ₹15 lakh → Tax under old regime: ₹2,73,000 | Tax under new regime: ₹1,09,200
• Income of ₹20 lakh → Tax under old regime: ₹4,29,000 | Tax under new regime: ₹2,08,000

This directly increases disposable income, allowing taxpayers to spend more, invest, or save for the future.

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Other Key Benefits of the New Tax Regime 2025

Apart from revised tax slabs and standard deduction, the government has introduced additional benefits:

1. Higher TDS & TCS Limits for Easier Compliance

• TDS limit for senior citizens’ interest income increased from ₹50,000 to ₹1 lakh
• TDS on rent increased from ₹2.4 lakh to ₹6 lakh per year

This reduces unnecessary tax deductions and makes compliance easier for individuals and businesses.

2. Tax Exemption on National Savings Scheme (NSS) Withdrawals

• Withdrawals from the National Savings Scheme (NSS) made after August 29, 2024, are now fully tax-exempt
• This encourages more individuals to invest in secure, long-term savings instruments

3. Extended Time for Filing Revised Tax Returns

• Taxpayers now have up to 4 years to file updated returns (previously 2 years)
• This provides greater flexibility to correct any tax filing mistakes

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Should You Switch to the New Tax Regime?

With the higher standard deduction and reduced tax rates, the New Tax Regime in 2025 is now more beneficial for:

• Salaried individuals who don’t claim many exemptions
• Self-employed professionals and business owners
• Taxpayers looking for a simpler tax filing process

However, if you heavily depend on deductions such as HRA, 80C, 80D, and home loan interest, the old tax regime may still be beneficial for you.

Choosing the Right Regime

• If your deductions (80C, 80D, home loan interest) exceed ₹2.5 lakh, you may benefit more from the old tax regime.
• If you do not have significant deductions, the New Tax Regime offers lower taxes and is much simpler.

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Final Thoughts: The Future of Income Tax in India

The 2025 tax reforms have made the New Tax Regime more appealing by increasing the exemption limit, raising the standard deduction, and introducing more favorable tax slabs.

These changes are expected to:
✅ Increase disposable income for taxpayers
✅ Boost consumer spending and investment
✅ Simplify tax compliance and filing

With these benefits, the New Tax Regime 2025 is now a stronger option for most taxpayers, especially those with minimal deductions. However, it is still important to compare both regimes before making a decision.

For more insights on tax planning and financial management, stay tuned to CMA Knowledge!

Do you think the new tax regime is beneficial? Share your thoughts in the comments!