Union Budget 2025-26: Income-Tax Benefits under New Regime explained vide FAQ

Union Budget 2025-26: Income-Tax Benefits under New Regime explained vide FAQ

Union Budget 2025-26: Income-Tax Benefits under New Regime explained vide FAQ

FAQ.1: Personal Income-tax reforms with special focus on middle class

Q.1. What is 'New Regime'?

Ans. New regime provides for concessional tax rates and liberal slabs. However, no deductions are allowed in the new regime (other than those specified for e.g. 80JJAA, 80M, standard deduction).

Q.2. What are the tax slabs in earlier new regime?

Ans. The Finance (No.2) Act, 2024 had the following slabs in the new tax regime for person, being an individual or Hindu undivided family or association of persons [other than a co- operative society], or body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2: –

Sl.No. Total Income (in Rs.) Rate of tax u/s 115BAC(1A)

1. Upto 3,00,000 Nil

2. 3,00,001 to 7,00,000 5%

3. 7,00,001 to 10,00,000 10%

4. 10,00,001 to 12,00,000 15%

5. 12,00,001 to 15,00,000 20%

6. Above 15,00,000 30%

Q.3. What are the new slabs in the proposed new regime introduced by Finance Bill, 2025?

Ans. The new slabs proposed are as under:

Sl.No. Total Income (Rs. In lacs) Rate of tax u/s 115BAC (1A)

1. 0- 4 0%

2. 4-8 5%

3. 8-12 10%

4. 12-16 15%

5. 16—20 20%

6. 20-24 25%

7. More than 24 Lacs 30%

Q.4. What is the tax benefit for different category of taxpayers (0-24 lacs)

Ans.

Total Income Tax as per existing rates[as per Finance (No.2)

Act, 2024]

Tax as per proposed rates Benefit of Rate/Slab Rebate Benefit [with reference to (3)] Total Benefit[computed when compared

to current slab rates]

Tax Payable under new regime

(1) (2) (3) (4)=(3)-(2) (5) (6)=(4)+(5) (7)

8 lac 30,000 20,000 10,000 20,000 30,000 0

9 lac 40,000 30,000 10,000 30,000 40,000 0

10 lac 50,000 40,000 10,000 40,000 50,000 0

11 lac 65,000 50,000 15,000 50,000 65,000 0

12 lac 80,000 60,000 20,000 60,000 80,000 0

13 lac 1,00,000 75,000 25,000 0 25,000 75,000

14 lac 1,20,000 90,000 30,000 0 30,000 90,000

15 lac 1,40,000 1,05,000 35,000 0 35,000 1,05,000

16 lac 1,70,000 1,20,000 50,000 0 50,000 1,20,000

17 lac 2,00,000 1,40,000 60,000 0 60,000 1,40,000

18 lac 2,30,000 1,60,000 70,000 0 70,000 1,60,000

19 lac 2,60,000 1,80,000 80,000 0 80,000 1,80,000

20 lac 2,90,000 2,00,000 90,000 0 90,000 2,00,000

21 lac 3,20,000 2,25,000 95,000 0 95,000 2,25,000

22 lac 3,50,000 2,50,000 1,00,000 0 1,00,000 2,50,000

23 lac 3,80,000 2,75,000 1,05,000 0 1,05,000 2,75,000

24 lac 4,10,000 3,00,000 1,10,000 0 1,10,000 3,00,000

25 lac 4,40,000 3,30,000 1,10,000 0 1,10,000 3,30,000

50 lac 11,90,000 10,80,000 1,10,000 0 1,10,000 10,80,000

* For income above 12 lac, in the case of resident individuals, marginal relief shall be allowable .

Q.5. What is the maximum total income for which tax liability for individual taxpayers is NIL.

Ans. In the proposed new tax regime, the maximum total income for which tax liability for individual taxpayers is NIL is Rs. 12 lakhs.

Q.6. To claim benefit of NIL tax liability mentioned above, what are the steps required to be taken?

Ans. The benefit of such Nil tax liability mentioned above is available only in the new tax regime. This New tax regime is the default regime. To avail the benefit of rebate allowable under proposed provisions of new tax regime, only return is to be filed otherwise no other step is required to be taken.

Q.7. The change in tax slabs is beneficial for which category of persons?

Ans. New tax regime is applicable to person, being an individual or Hindu undivided family or association of persons [other than a co-operative society], or body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2. Accordingly, change in tax slabs will benefit all these persons.

Q.8. How will a person who has an income Rs 12 lac benefit from new rates?

Ans. Any individual earlier was required to pay a tax of Rs 80,000 (in the new regime) for an income of Rs. 12 lacs. Now he will be required to pay nil tax on such income.

Q.9. Whether the limit of total income for NIL tax payments has increased in this budget?

Ans. Yes, the limit of total income for NIL tax payments in the new tax regime has been increased to Rs. 12 lakhs in this budget provided the taxpayer files ITR to avail the rebate.

Q.10. What was the earlier limit of income for nil tax payment?

Ans. Earlier the limit of income for nil tax payment was Rs 7 lac. By increasing this limit to Rs 12 lakh around one crore assessees who were earlier required to pay tax varying from Rs 20,000 to Rs 80,000 will be now paying nil tax.

Q.11. Is the standard deduction on salary available in the new regime?

Ans Yes, a standard deduction of Rs. 75,000 is available to a tax payer in the new regime. Therefore, a salaried tax payer will not be required to pay any tax where his income before standard deduction is less than or equal to Rs 12,75,000.

Q.12. Whether standard deduction is available in old regime?

Ans. Standard deduction of Rs. 50,000 is available in old regime.

Q.13. How many tax payers will benefit from the new rates and slabs?

Ans. Presently, for AY 2024-25, about 8.75 crore persons have filed their ITRs. All such assessees who were paying tax in the new tax regime will benefit from the change in rates and slabs.

Q.14. What is the extra amount available to the taxpayers as a result of this change?

Ans. Approximately Rs. 1 lakh crore will be made available in the hands of the taxpayers by virtue of changes in slab, rates and rebate.

Q.15. How is the marginal relief available to individuals?

Ans. In the new regime under section 115BAC(1A), marginal relief is available to only resident individuals who have income marginally above Rs. 12 lacs. For example, for a person having income of Rs. 12, 10,000/-, in the absence of marginal relief, the tax, works out to be Rs. 61,500/-(5% of Rs.4 lacs+10% of 4 lac and 15% of Rs.10 thousand). However, due to marginal relief, the amount of tax to be actually paid is Rs. 10,000/-.

Q.16. How much tax will be paid by a tax payer having income of Rs 12,10,000? What is marginal relief?

Ans. The tax liability on such tax payer by way of slabs only is Rs. 61,500. How ever a person having Rs 12 lac income pays nil tax. By providing marginal relief it has been ensured that the tax payable by a person having income marginally above Rs 12 lacs is required to pay only marginal amount of tax equal to the amount of income above Rs 12 lacs so that his carry home is also Rs 12 lacs. In this case he will be required to pay a tax of Rs 10,000.

Income Tax without Marginal relief (Rs.) Tax actually payable with marginal relief

Rs 12,10,000 61,500 10,000

Rs 12,50,000 67,500 50,000

Rs 12,70,000 70,500 70,000

Rs 12,75,000 71,250 71,250 [ No marginal relief]

 

Q.17. How the marginal relief is computed?

Ans. The marginal relief is computed in the following manner:-

(i) First the tax as per slab rate is computed on the total income.

For e.g. In the answer given to question no.15 above, tax on the total income of Rs. 12,10,000/-shall be computed in following steps:

Sl.No. Amount to be charged (out of total income of Rs. 12, 10,000/-) Tax Amount as per slab rates

1. Initial amount of 4 lac Nil (being basic exemption)

2. Tax on subsequent amount of 4 lac (from 4 lac to 8 lac) Rs. 20,000 (being 5% of Rs. 4 lac)

3. Tax on subsequent amount of 4 lac (from 8 lac to 12 lac) Rs. Rs. 40,000/- (being 10% of Rs. 4 lac)

4. Tax on balance amount of Rs. 10,000/- Rs. 1500 ((being 15% of Rs. 10,000)

Aggregate tax liability Rs. 61, 500/-

(ii) Tax payable on total income of Rs. 12,00,000/- on which rebate is available is Nil.

(iii) Now the tax liability without marginal relief (in this case Rs. 61,500) shall be compared with amount exceeding total income upto which rebate is available [in this case Rs. 10,000, [i.e. Rs.12,10,000- Rs. 12,00,000]

(iv) The marginal relief shall be computed by deducting the income exceeding Rs. 12, 10,000 (i.e. Rs.10,000) from total tax liability determined in this case (i.e. Rs. 61,500) as tabulated above.

(v) Therefore, in the above case rebate by way of marginal relief is Rs. 51,500 (61,500/- 10,000/-= 51,500/-) is allowed.

(vi) Tax payable is therefore Rs. 10,000 [Rs. 61,500-Rs.51,500]

Q.18. What is the maximum amount of rebate available to any tax payer?

Ans. The maximum rebate available is Rs 60,000 which is there for a tax payer having income of Rs 12 lacs on which tax is payable as per the new slabs.

Q. 19. What is the total income till which marginal relief is admissible?

Ans. The total income till which marginal relief is available is near about Rs. 12,75,000/-.

Q.20. Whether special income having special rate such as capital gains, lottery etc. also be eligible for rebate?

Ans. No rebate is not available on income from capital gains or lotteries or any other income on which special rate has been provided in the Act. It is available only on the tax payable as per slabs under section 115BAC.                             Q.21. What is the difference between rebate and marginal relief?

Ans: Rebate is the deduction from tax which is available to tax payers having income upto Rs. 12 Lacs in the new regime. Marginal relief ensures that taxpayers having  income marginally higher than Rs. 12 lacs do not pay tax more than the income in excess of 12 lacs.