In the Union Budget 2025, Finance Minister Nirmala Sitharaman made significant adjustments to the income tax structure. The new tax system offers middle-class taxpayers substantial incentives, expanded exemptions, and updated slabs. To better comprehend these changes, below are the most often asked questions (FAQs).

1. What is the current tax structure?

With the exception of a few, such as the standard deduction, 80JJAA, and 80M, the new tax system eliminates most deductions while offering lower tax rates and wider income slabs.

2. Which tax slabs existed under the previous administration?

The Finance (No. 2) Act, 2024, had separate tax slabs for individuals, Hindu Undivided Families (HUFs), and a few other entities prior to Budget 2025.

3. Which tax slabs have been updated in Budget 2025?

The following changes have been made to the tax slabs under the new regime:

Tax-free up to Rs 4 lakh

– 5% of Rs 4 lakh to Rs 8 lakh

10% of Rs 8 lakh to Rs 12 lakh

15% of Rs 12 lakh to Rs 16 lakh

20% of Rs 16 lakh to Rs 20 lakh

25% of Rs 20 lakh to Rs 24 lakh

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4. How is tax-free income up to Rs 12 lakh?

For anyone earning up to Rs 12 lakh, the government offers refunds. Due to a normal deduction of Rs 75,000, salaried taxpayers are eligible for an enhanced threshold of Rs 12.75 lakh. For those making Rs 8 lakh, the rebate starts at Rs 10,000, and for those making Rs 12 lakh, it rises to Rs 80,000.

5. How is tax computed for an individual who makes Rs 16 lakh a year?

The first Rs 4 lakh is tax-free.

– Rs 20,000 (5% tax on Rs 4 lakh less Rs 8 lakh)

Tax of 10% on Rs 8 lakh minus Rs 12 lakh is Rs 40,000.

Taxes of 15% on Rs 12 lakh minus Rs 16 lakh is Rs 60,000.

The total amount of tax due is Rs 120,000, which is Rs 50,000 less than under the previous administration.

6. How much tax is a person earning Rs 50 lakh going to have to pay?

In comparison to the previous tax system, a person earning Rs 50 lakh would now pay Rs 1,080,000 in taxes, saving Rs 110,000.

7. To whom does the new tax system provide advantages?

Individuals, HUFs, groupings of people (apart from cooperative societies), and artificial juridical bodies are all subject to the updated tax slabs.

8. Has there been a rise in the tax-free income limit?

Indeed, approximately one crore taxpayers who previously paid between Rs 20,000 and Rs 80,000 in taxes would gain from the increase in the tax-free income ceiling from Rs 7 lakh to Rs 12 lakh.

9. Does the new regime allow for the standard deduction?

It is possible to take a standard deduction of Rs 75,000. This implies that anyone who makes up to Rs 12.75 lakh would not be required to pay taxes.

10. What was the prior regime’s standard deduction?

Under the previous tax system, the standard deduction was still Rs 50,000.

11. How many taxpayers will the new slabs benefit?

These improvements would help around 8.75 crore taxpayers who submitted ITRs for AY 2024–2025.

12. How much more money will taxpayers make as a result of these adjustments?

The extra Rs 1 lakh crore in disposable income that taxpayers would get as a result of the new tax slabs, rates, and refunds.

13. How does marginal relief operate and what is it?

Taxpayers who make slightly more than Rs 12 lakh are protected from paying noticeably more taxes because of marginal relief. For instance, without marginal reduction, a person earning Rs 12,10,000 would owe Rs 61,500 in taxes. They would only have to pay Rs 10,000 thanks to marginal relief, which keeps their take-home pay close to Rs 12 lakh.

14. What is the highest possible rebate?

Taxpayers earning Rs 12 lakh are eligible for the maximum refund of Rs 60,000.

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15. What is the income threshold at which marginal assistance is available?

For earnings up to around Rs 12.75 lakh, a marginal reduction is available.

16. Does the rebate cover lottery prizes or capital gains?

No, income from lotteries, capital gains, or any other profits subject to special tax rates is not eligible for the refund. Only taxes due under Section 115BAC are covered by it.

17. What distinguishes marginal assistance from a rebate?

Under the new system, taxpayers earning up to Rs 12 lakh may get a rebate, which is a tax reduction. Marginal relief makes sure those who make a little more than Rs 12 lakh don’t pay more in taxes than those who make more than this amount.

Rebate: For taxpayers earning up to Rs 12 lakh, the tax payment is reduced to nil.

Marginal relief: Prevents a significant tax hike for those earning just over Rs 12 lakh.

While providing certain advantages to wealthy earnings, the updated tax slabs in Budget 2025 give significant relief to middle-class taxpayers. The administration wants to increase discretionary income and spur economic development by raising the tax-free income level and modifying slabs. Make sure you submit your ITR on time if you are eligible for tax advantages.