In the Union Budget 2025, Finance Minister Nirmala Sitharaman introduced major reforms in the income tax structure aimed at benefiting middle-income salaried individuals. One of the standout announcements was the increase in the tax-free income limit to Rs 12 lakh under the new tax regime. Additionally, salaried employees are now eligible for an increased standard deduction of Rs 75,000.
These tax benefits will be applicable starting April 1, 2025. However, when you file your Income Tax Return (ITR) in July 2025, it will be for the financial year 2024-25 (AY 2025-26), meaning the rules set in the Finance Act 2024 will still apply. The provisions announced in Budget 2025 will reflect only when you file your ITR in July 2026.
What Applies When Filing ITR in July 2025
The changes announced in Budget 2024 continue to govern tax filing in July 2025. Here’s what taxpayers need to know:
- The standard deduction for salaried individuals was increased to Rs 75,000 from the earlier Rs 50,000.
- No tax on income up to Rs 3 lakh.
- Income between Rs 3 lakh to Rs 7 lakh is taxed at 5%.
- A rebate of up to Rs 25,000 is available under Section 87A.
- For individuals earning a gross income of Rs 7.75 lakh, no income tax is payable, thanks to the combined benefit of the rebate and standard deduction.
- These benefits apply only under the new tax regime, which is now the default option.
Updated Tax Slabs: Old vs New Regime
Below is a comparative table of the income tax slabs under both regimes as applicable in FY 2024-25:
| Income Range | New Tax Regime Rate | Old Tax Regime Rate |
|---|---|---|
| Up to Rs 2.5 lakh | Nil | Nil |
| Rs 2.5 lakh to Rs 3 lakh | Nil | 5% on income above Rs 2.5 lakh |
| Rs 3 lakh to Rs 5 lakh | 5% | 5% |
| Rs 5 lakh to Rs 7 lakh | 5% | 20% on income above Rs 5 lakh |
| Rs 7 lakh to Rs 10 lakh | 10% | 20% |
| Above Rs 10 lakh | 20% or 30% depending on bracket | 30% |
Choosing the Right Tax Regime
While the new tax regime is now the default, taxpayers still have the option to choose the old regime. The new regime offers lower tax rates and simplified filing but eliminates several exemptions and deductions. On the other hand, the old regime allows claims such as HRA, LTA, home loan interest, and Section 80C investments.
Before choosing, taxpayers should compute their tax liability under both systems to determine which is more beneficial. Tools such as online tax calculators can be helpful in making this decision.
Key Highlights for Salaried Taxpayers
- Standard Deduction: Rs 75,000 under the new regime for FY 2024-25.
- Tax-Free Income: Effective zero tax liability for income up to Rs 7.75 lakh due to Section 87A rebate and standard deduction.
- Default Regime: New tax regime applies unless the old one is specifically opted for.
When Will Budget 2025 Changes Apply?
The tax benefits announced in Budget 2025, including zero tax up to Rs 12 lakh, will take effect from April 1, 2025. These will impact tax returns filed in July 2026 for FY 2025-26, not those filed in July 2025.
Conclusion
Filing your ITR in July 2025 means adhering to the tax provisions of the Finance Act 2024. Though Budget 2025 brings exciting changes like zero tax on income up to Rs 12 lakh, these are not applicable for the current filing cycle. Taxpayers should assess both tax regimes and use deductions and rebates strategically to minimize liability.
FAQs
What is the tax-free income limit for FY 2024-25?
For FY 2024-25, under the new tax regime, there is no tax on income up to Rs 7 lakh. When factoring in the Rs 75,000 standard deduction, individuals earning up to Rs 7.75 lakh can avoid paying any tax.
Is the Rs 12 lakh tax exemption applicable in 2025?
No, the exemption up to Rs 12 lakh announced in Budget 2025 will apply from FY 2025-26, meaning it will affect tax filings in July 2026.
Can I still use the old tax regime?
Yes, taxpayers can opt for the old tax regime while filing ITR, but they need to indicate their choice explicitly. Otherwise, the new regime is the default.
Are deductions like 80C allowed under the new regime?
No, the new regime does not permit most deductions including those under Section 80C, 80D, or HRA. Only the standard deduction of Rs 75,000 for salaried individuals is allowed.
What is the last date to file ITR for FY 2024-25?
The due date for filing ITR for FY 2024-25 is July 31, 2025, unless extended by the government.
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