Income Tax Rules 2026: The year 2025 has brought relief for taxpayers in many ways. In Budget 2025, the government has made several important changes to income tax rules, keeping the middle class and salaried individuals in mind. The aim of these changes is not only to simplify the tax system but also to make it more transparent and taxpayer-friendly. From increasing the tax-free income limit to improving rules related to TDS and investments, these decisions will directly impact your tax planning in the coming years. Let’s learn about five major income tax changes made in Budget 2025 that will affect both your income and taxes.
No Tax on Income Up to ₹12.75 Lakhs
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The biggest relief in Budget 2025 is the tax rebate provided under Section 87A. Under the new tax regime, if a person’s net taxable income is up to ₹12 lakh, they will not have to pay income tax. In addition, salaried employees will also get the benefit of a standard deduction of ₹75,000. This means that the tax will be zero on an annual salary of up to ₹12.75 lakh. However, if the income is higher than this, tax will have to be paid according to the chosen tax regime.
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Tax Relief on Medical Expenses
Another major relief has been provided for salaried employees in Budget 2025. The tax-free perquisite limit for expenses incurred by the company for medical treatment abroad will be increased. Perquisites are the additional facilities or benefits that an employee receives in addition to their salary. This limit had not been changed for a long time, while the cost of treatment and living expenses has continuously increased. Increasing the limit will allow more employees to benefit from tax exemptions.
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Tax Rules on ULIP Earnings Clarified
The tax implications of Unit Linked Insurance Plans (ULIPs) have been clarified in the Budget 2025. ULIP policies that do not qualify for tax exemption under Section 10(10D) will now be treated as capital assets. This means that profits from such policies will be taxed as capital gains. Previously, there was considerable confusion among investors on this matter, which has now been resolved.
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Significant Relief on Interest Income for Senior Citizens
Budget 2025 has also given special consideration to the interests of senior citizens. The TDS (Tax Deducted at Source) limit on interest income has been increased from ₹50,000 to ₹1 lakh. This means that if the annual interest earned from bank FDs or other savings is up to ₹1 lakh, no TDS will be deducted. This will provide senior citizens with better cash flow and reduce the need for frequent tax refund applications.
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Relaxation in TDS Rules on Dividend Income
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To provide relief to small investors, the TDS limit on dividend income has also been increased. Now, no TDS will be deducted on annual dividends up to ₹10,000, compared to the previous limit of ₹5,000. This change will benefit investors who invest small amounts in shares or mutual funds.
Overall, these changes related to income tax demonstrate the government’s intention to simplify the tax system and make it more taxpayer-friendly. Whether you are a salaried employee, a senior citizen, or an investor, these rules in Budget 2025 can help you optimize your tax planning. With the right information and timely planning, you can take full advantage of these changes.