Relief for taxpayers: Income tax exemption limit increased to ₹4L
What's the story
The Union Budget for the fiscal year 2025-26 has brought a major change in the income tax structure. The basic exemption limit under the new tax regime has been increased from ₹3 lakh to ₹4 lakh. This change is expected to benefit all taxpayers by decreasing their overall tax liability. The last increase in this limit was during the Budget 2023 when it was increased from ₹2.5 lakh to ₹3 lakh.
Tax implications
New tax regime and ITR filing requirements
The hike in the basic exemption limit means taxpayers will now have to file their income tax returns (ITRs) only if their gross taxable income exceeds this new limit. However, there are some exceptions to this. The tax regime opted for a particular fiscal year determines a person's income tax exemption limit. Under the new tax regime, an exemption limit of ₹4 lakh applies irrespective of the taxpayer's age.
Age factor
Old tax regime's exemption limit varies with age
If a taxpayer opts for the old tax regime for a fiscal year, the basic exemption limit will depend on their age. For those aged below 60 years, income up to ₹2.5 lakh in a fiscal year is exempt from tax under this regime. Senior citizens aged between 60-80 years have an exemption limit of ₹3 lakh, while super-senior citizens aged 80+ enjoy ₹5 lakh per fiscal year.
ITR rules
Mandatory ITR filing under certain conditions
Even though the gross taxable income is below the basic exemption limit, there are cases where filing an income tax return is compulsory. This includes cases where the electricity bill paid in a fiscal year exceeds ₹1 lakh, foreign travel expenditure exceeds ₹2 lakh, there is income from foreign assets, or if TDS/TCS is ₹25,000 or more in a fiscal year. For senior citizens, it's ₹50,000 or more.
Tax relief
No income tax for individuals earning up to ₹12L
Finance Minister Nirmala Sitharaman also announced that people earning up to ₹12 lakh annually won't have to pay any income tax under the new regime. The new Income Tax slabs under the new regime are: ₹0-4 lakh: Nil, ₹4-8 lakh: 5%, ₹8-12 lakh: 10%, ₹12-16 lakh: 15%, ₹16-20 lakh: 20%, etc. This move aims at relieving salaried people of financial burden, increasing their disposable income, and boosting consumption.