What were the key changes in India's Budget 2025 income tax?

Budget 2025 revised tax slabs and increased rebates under the new regime, making income up to Rs 12.75 lakh tax-free for salaried individuals.

Who benefited most from Budget 2025's tax changes?

Middle-income taxpayers and salaried individuals earning up to approximately Rs 1 lakh per month received the most significant tax relief.

What are the expectations for India's Budget 2026 tax policies?

Budget 2026 is expected to focus on fine-tuning the tax system and ensuring a smooth transition to the new Income-Tax Act, rather than introducing major tax cuts.

Home / Business and Economy / India's Tax Shift: New Regime Dominates

India's Tax Shift: New Regime Dominates

7 Jan

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Summary

Budget 2025 significantly altered India's tax framework, favoring the new regime.
Salaried taxpayers earning up to Rs 12.75 lakh saw no tax burden.
Budget 2026 expectations lean towards fine-tuning, not sweeping tax cuts.

Last year's Union Budget enacted a significant overhaul of India's personal income tax structure, marking a pivotal moment. The changes introduced in Budget 2025 reshaped the new tax regime, offering substantial relief to salaried individuals and narrowing the divide with the older system. This strategic move effectively exempts incomes up to Rs 12.75 lakh for many, simplifying tax planning.

The revised slabs and higher rebate under the new regime made it the rational choice for numerous taxpayers, especially those without extensive deductions like housing loan interest. The old regime, while still existing, is now perceived more as a transitional option. Beyond income tax, structural changes included the new Income Tax Act, an extended window for updated returns, and revised rules for ULIPs.

As Budget 2026 approaches, the focus is expected to shift from major relief to system refinement. Potential adjustments may include modest standard deduction increases to combat inflation. Experts anticipate a strong emphasis on ensuring a smooth transition to the new Income-Tax Act, 2025, alongside efforts to address ongoing compliance and litigation concerns within the tax framework.