Income Tax 2025 Explained: 20 Big Changes Every Taxpayer Must Know (Effective from 1 April 2026)

1. More Income Completely Tax-Free

2. New, Simpler Tax Slabs (New Regime)

The Government wants most people to move to the new tax regime. The new slabs are:

Annual Income	Tax Rate
₹0 – ₹4 lakh	0% (No tax)
₹4 – ₹8 lakh	5%
₹8 – ₹12 lakh	10%
₹12 – ₹16 lakh	15%
₹16 – ₹20 lakh	20%
Above ₹20 lakh	30%

3. No Tax up to ₹8 Lakh

If your taxable income is up to ₹8 lakh in the new regime, rebate under Section 87A makes your tax zero. So, middle-class families will not pay any income tax at all till ₹8 lakh.

4. Bigger Standard Deduction

Salaried people and pensioners get a straight ₹75,000 reduction from their income before calculating tax (earlier ₹50,000). No paperwork needed, it’s automatic.

5. Chapter VI-A Deductions – Old Regime Stays the Same

If you still use the old regime, you can continue to claim:

• 80C: Investments in LIC, EPF, PPF, ELSS, housing loan principal, etc. (up to ₹1.5 lakh)

• 80D: Health insurance premiums (₹25k/₹50k)

• 80G: Donations to charity

• 80E: Education loan interest

• Others like 80U, 80DD (for disability), etc.

6. Chapter VI-A in New Regime – Almost All Removed

The new regime removes most of the above deductions to make things simple. Only a few stay:

• Employer’s contribution to NPS (80CCD(2))

• Agnipath Scheme contribution deduction (80CCH)

• Disability-related deductions (80U, 80DD)

• Deduction for specified diseases (80DDB)

7. No Change in 80C Limit

The maximum limit is still ₹1.5 lakh. The government didn’t raise it.

8. Shorter Holding Period for Lower Capital Gains Tax

If you sell certain investments like shares or property after 18 months, it will be treated as long-term capital gain (LTCG) instead of earlier 24 months.

9. New LTCG Tax Rate on Shares

Selling listed shares after 18 months now attracts 12% tax flat — the old system was 10% after ₹1 lakh exemption. This makes it simpler but slightly changes your tax math.

10. Startup Tax Holiday Extended

If you run a government-registered startup, your 3-year tax holiday window is extended by 2 more years.

11. MSME Manufacturing Units – Low 15% Tax Extended

If you start a new manufacturing MSME before 31 March 2028, you can pay just 15% corporate tax for the first few years.

12. TDS Rates Made Simple

Earlier, the same type of payment could have 2–3 different TDS rates depending on small rules. Now, similar payments will have one rate. Example: all professional service payments may have the same rate.

13. Higher Limits Before TDS Applies

Small transactions to freelancers, contractors, or agents won’t attract TDS unless they cross higher revised yearly limits. So, less hassle for small earners.

14. Faster TDS Refunds

• AI-based processing will ensure refunds happen in weeks, not months.

• The system will automatically calculate and pay interest if your refund is delayed

15. Advance Tax Relaxation for Senior Citizens

Senior citizens with only pension or interest income don’t have to pay advance tax in instalments anymore. They can pay at year-end if needed.

16. Higher Limit Before Audit Needed

If 95% or more of your transactions are through digital mode (UPI, bank, card), you can have higher turnover before the law forces you to get a tax audit.

17. 100% Online Tax Communication

No more physical letters. All notices, queries, and replies will be through the income tax portal.

18. Automatic E-Verification for Big Money Deals

If you buy property, deposit a big cheque, or make high-value purchases, the system will auto-match it with your tax return — no extra forms needed, but mismatches may trigger queries.

19. Stricter Penalty for Late TDS Deposit

If you deduct TDS but don’t deposit it in time, daily interest will be charged and stricter penalties apply.

20. Auto Adjustment of Refunds with Old Dues

If you have pending old-year taxes, the system will adjust them before giving you a refund. Balance will be sent to your bank automatically.