The government has overhauled the Income Tax law with sweeping changes effective from FY 2025-26. From higher exemption limits and revised tax slabs to faceless assessments and simplified compliance, the new law aims to make taxation fairer, easier, and more transparent. For taxpayers, these reforms bring both financial relief and greater clarity. In this article, we break down the 10 key changes in the new income tax law that you must know before filing your next return.
Here’s a quick breakdown of the 10 most important changes every taxpayer should know for FY 2025-26 onwards.
1. Higher Basic Exemption Limit
Under the new tax regime, income up to ₹12 lakh is fully exempt. With the benefit of a standard deduction of ₹75,000, the effective no-tax income threshold now stands at ₹12.75 lakh.
2. Revised Income Tax Slabs (Effective FY 2025-26)
The tax slabs have been rationalised to reduce burden on the middle class:
- 0 – ₹4 lakh → Nil
- ₹4 – ₹8 lakh → 5%
- ₹8 – ₹12 lakh → 10%
- ₹12 – ₹16 lakh → 15%
- ₹16 – ₹20 lakh → 20%
- ₹20 – ₹24 lakh → 25%
- Above ₹24 lakh → 30%
3. Enhanced Rebate Under Section 87A
Eligible taxpayers can now claim a rebate of up to ₹60,000 or the actual tax payable, whichever is lower—providing substantial relief for small and middle-income earners.
4. Reduction in Number of Sections
The old Income-tax Act had over 800 sections, creating complexity. The new law streamlines this with 536 sections in 23 chapters and 16 schedules, making it far more concise and easier to navigate.
5. Introduction of “Tax Year” Concept
To avoid confusion between “Previous Year” and “Assessment Year,” the new law introduces a unified term: Tax Year. This simplifies compliance and improves clarity for taxpayers.
6. 100% Faceless and Digital Assessments
All assessments and appeals will now be fully online, eliminating physical interaction, reducing corruption risk, and ensuring a smoother, harassment-free process.
7. Refunds Allowed Even After Deadline
Earlier drafts restricted refund claims to returns filed before the due date. The new law has removed this restriction, allowing taxpayers to claim TDS/TCS refunds even for belated returns, ensuring fairness and relief for genuine cases.
8. Advance Nil-TDS Certificates
Taxpayers with no tax liability can apply for advance nil-TDS certificates, preventing unnecessary deduction of tax at source.
9. More Clarity on Deductions
The new law provides clearer provisions for deductions, including:
- Standard deduction on house property income
- Pre-construction interest on home loans
- Deduction on inter-corporate dividends
10. Stricter Rules on Anonymous Donations
Religious and charitable trusts are now prohibited from accepting anonymous donations, except when engaged in recognised social services—ensuring better transparency and accountability in charitable funding.
✅ Key Takeaway:
The new income tax law is designed to increase exemptions, reduce complexity, and digitise compliance. For individual taxpayers, it means more clarity, less paperwork, and potentially higher savings.