Key Changes in the New Income Tax Bill 2025 A Look at the Tax Slabs

India’s tax regime, Finance Minister Nirmala Sitharaman tabled the new Income Tax Bill 2025 in the Lok Sabha, outlining key revisions that will impact taxpayers across the country. This bill, which is expected to come into force from the beginning of the next financial year, introduces a streamlined set of income tax slabs designed to ease the financial burden on middle and high-income earners.

While the bill does not propose any drastic changes to the current tax structure, it does offer clearer distinctions across income categories and updates the rate of taxation. One of the most talked-about aspects of the Income Tax Bill 2025 is the revised set of tax slabs. The government has retained its commitment to providing relief to lower and middle-income households while ensuring that higher income earners contribute more to the nation’s tax pool. The tax slabs, which are set to come into effect in the upcoming financial year, are as follows:

• Up to Rs. 4,00,000: No tax
• Rs. 4,00,001 – Rs. 8,00,000: 5% tax
• Rs. 8,00,001 – Rs. 12,00,000: 10% tax
• Rs. 12,00,001 – Rs. 16,00,000: 15% tax
• Rs. 16,00,001 – Rs. 20,00,000: 20% tax
• Rs. 20,00,001 – Rs. 24,00,000: 25% tax
• Over Rs. 24,00,000: 30% tax

For most individuals in the lower and middle-income brackets, the new tax slabs provide relief. Those earning up to Rs. 4,00,000 will continue to be exempt from tax, a significant benefit for smaller earners. Additionally, the introduction of a tiered tax system, where earnings beyond Rs. 4,00,000 are taxed incrementally at low rates, aims to keep tax obligations manageable for those in the Rs. 4,00,000 to Rs. 8,00,000 range. For those in the higher-income segments, the rates still progress, but at slightly steeper increments. The most significant tax increase is seen for individuals earning above Rs. 24,00,000, who will now face a 30% tax rate. While this will affect a smaller portion of the population, the emphasis on progressive taxation ensures that the burden is fairly distributed.

The new bill reflects the government’s ongoing effort to streamline the income tax system while maintaining a fair and transparent tax structure. For many, this bill signals a shift towards a more predictable and accessible tax regime, one that gradually addresses income inequality through its progressive tax system. Importantly, the new tax bill is in line with the government’s broader economic goals, including increasing tax compliance and boosting public revenue. The changes in the tax slabs aim to create an equitable system while reducing the tax burden on lower-income families. At the same time, the bill seeks to enhance the revenue collected from the highest earners, ensuring the government has the necessary resources to fund public infrastructure and development initiatives.

While the changes to the income tax system are positive, experts have suggested that India’s tax reforms still have a long way to go. The implementation of new schemes like direct tax benefits for businesses, as well as greater investment in technology to make tax payments more efficient, will be crucial in addressing broader infrastructure concerns related to tax collection and processing. With the digitalisation of tax filings, the government hopes to make compliance smoother and reduce tax evasion. The passage of the Income Tax Bill 2025 marks a crucial step in the nation’s ongoing journey to overhaul its tax system. Though the changes to the tax slabs are incremental, the impact on the economy and individual taxpayers will likely be felt immediately. Taxpayers can now better plan their financial strategies knowing that the tax system will continue to evolve to meet the challenges of an ever-changing economic landscape. while the Income Tax Bill 2025 might not usher in radical change, it represents a solid step forward in simplifying tax compliance and providing equitable tax relief.