The Hon’ble Finance Minister (‘FM’), presented the Finance Bill, 2025 (‘the Bill’) on February 1, 2025.

In the Bill, the FM proposed to amend the slab & tax rates prescribed in the default new tax regime under section 115BAC of the Income Tax Act, 1961 (‘the Act’) to be applicable from Assessment Year 2026-2027. Amendments also proposed in Section 87A (Rebate) whereby applicability of such rebate is extended to the income upto Rs 12 lakh from existing Rs 7 lakh.

Key Tax Implications of amendments proposed in slab rates for new tax regime and amendments proposed in section 87A applicable for Resident Individual in summarised form are as under:

• No Tax payable if income earned is upto Rs 12 Lakh for a person earning income other than salary income like business income, professional income, rental income, other source income etc. Rebate u/s 87A will be available in such case.

• No Tax payable if income earned is upto Rs 12.75 Lakh for a person earning salary income as well as other incomes like business income, professional income, rental income, other source income etc. because of standard deduction of Rs 75000 allowed from salary income.

• Rebate u/s 87A shall not be available if total income exceeds Rs 12 Lakh (excluding income taxable at special rate i.e. special rate income will not be clubbed in the other income for purpose of calculating limit of Rs 12 lakh for rebate purposes). In such case, total income (other than special rate income) shall be chargeable to tax as per applicable slab rates subject to marginal relief.

• Marginal Relief available if income (other than special rate income) exceeding Rs 12 Lakh is lower than tax applicable on total income (other than special rate income). Tax payable in such case will be restricted to income (other than special rate income) exceeding Rs 12 lakh.

• Rebate u/s 87A shall not be available on the income taxable at special rate like STCG taxable @20%, LTCG taxable @12.5% etc. Applicable tax at special rate income has to be paid even if total income including special rate income is within Rs 12 lakh limit. However, no tax on other income in such case due to rebate u/s 87A.

Our Partner, Mr. Parveen Kumar and Senior Consultant, Mr. Gaurav Bhuddi have written the above article and it has been published in Taxsutra.

Disclaimer:- The information herein is based on the Finance Bill, 2025 dated 01.02.2025, memorandum to the Bill and FAQs relating thereto issued dated 01.02.2025. While the information is believed to be accurate, we make no representations or warranties, express or implied, as to the accuracy or completeness of it. Readers should conduct and rely upon their own examination and analysis and are advised to seek their own professional advice. This note is not an offer, advice or solicitation. We accept no responsibility for any errors it may contain, whether caused by negligence or otherwise or for any loss, howsoever caused or sustained, by the person who relies upon it.

PDF version is attached: New Regime – Proposed Amendment in Depth Analysis of Tax Impact on Income up to and above Rs.12 Lakh in hands of Resident Individual