Finance Minister Nirmala Sitharaman tabled the union budget 2025-26 on Saturday. Like other budgets, this budget also garnered major attention on social media. The one major announcement on everybody's mind was the increase in the nil tax slab from ₹7 lakhs to ₹12 lakhs. 

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New Tax regime

₹0-4 lakh -- Nil
₹4-8 lakh -- 5%
₹8-12 lakh -- 10%
₹16-20 lakh -- 20%
₹20-24 lakh -- 25%
Above ₹24 lakh -- 30%

To calculate the tax rebate on incomes of ₹13 lakhs, ₹15 lakhs, and ₹20 lakhs, here are the numbers:

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Income = ₹13,00,000

₹0–4 lakh: 0% = ₹0
₹4–8 lakh (₹4 lakh): 5% of ₹4,00,000 = ₹20,000
₹8–12 lakh (₹4 lakh): 10% of ₹4,00,000 = ₹40,000
₹12–13 lakh (₹1 lakh): 20% of ₹1,00,000 = ₹20,000

Total Tax = ₹0 + ₹20,000 + ₹40,000 + ₹20,000 = ₹80,000

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Income = ₹15,00,000

₹0–4 lakh: 0% = ₹0
₹4–8 lakh (₹4 lakh): 5% of ₹4,00,000 = ₹20,000
₹8–12 lakh (₹4 lakh): 10% of ₹4,00,000 = ₹40,000
₹12–15 lakh (₹3 lakh): 20% of ₹3,00,000 = ₹60,000

Total Tax = ₹0 + ₹20,000 + ₹40,000 + ₹60,000 = ₹1,20,000


Income = ₹20,00,000

₹0–4 lakh: 0% = ₹0
₹4–8 lakh (₹4 lakh): 5% of ₹4,00,000 = ₹20,000
₹8–12 lakh (₹4 lakh): 10% of ₹4,00,000 = ₹40,000
₹12–16 lakh (₹4 lakh): 20% of ₹4,00,000 = ₹80,000
₹16–20 lakh (₹4 lakh): 25% of ₹4,00,000 = ₹1,00,000

Total Tax = ₹0 + ₹20,000 + ₹40,000 + ₹80,000 + ₹1,00,000 = ₹2,40,000

The new tax bill will be tabled next week. While everybody knows about the latest changes, other major announcements have also been made regarding direct income tax.

TDS & TCS simplifications

To simplify tax compliance, the government has announced major reforms. This includes increasing the TDS threshold on rent from ₹2.40 lakhs to ₹6 lakhs per year and raising the TCS exemption limit on Liberalised Remittance Scheme (LRS) transactions from ₹7 lakhs to ₹10 lakhs. TCS has also been removed from education-related remittances in education loans. Special focus is on senior citizens. The tax deduction limit on interest income has been doubled to reduce the tax burden among retirees. Tax exemption has also been provided on old National Savings Scheme (NSS) accounts.

Deduction for NPS Vatsalya Scheme

Budget 2025 extends tax benefits to the newly launched NPS Vatsalya Scheme. This new scheme allows parents and guardians to open and manage an NPS account for minors for minors until they reach the age of 18 years. The contributions would be eligible for deduction under Sector 80CCD(1B) up to a maximum of ₹50,000. The scheme also allows for partial withdrawals under special circumstances, with no tax deduction for withdrawals less than 25 per cent of the contribution amount.

Rationalisation of taxation of ULIPs

Unit-linked insurance plans serve a dual purpose: they are life insurance policies and investment opportunities. Earlier, ULIPs were taxed as income from other sources, with 30 per cent rates. Under the new provisions, ULIPs with annual premiums above ₹2.5 lakhs will be taxed as capital gains instead of income. Long-term capital gains beyond 1 year will be taxed at 12.5 per cent.

Other notable provisions

The time limit to file an updated return has been extended from 2 years to 4 years. Rules have also been simplified for self-occupied properties. The annual value of a self-occupied property will be considered as nil.