Income Tax Reforms in Budget 2025: Key Changes and Relief for Taxpayers

In her latest budget speech for the Assessment Year (AY) 2025-26, Finance Minister Nirmala Sitharaman outlined significant changes to the income tax structure, aimed at providing relief to taxpayers and enhancing clarity in tax deductions. Among the key announcements, the Minister proposed rationalizing the Tax Deducted at Source (TDS) framework by reducing the number of rates and simplifying the thresholds for tax deduction.

TDS Changes and Threshold Revisions

The Finance Minister highlighted that the threshold amounts for TDS will be increased, bringing much-needed uniformity and transparency to the tax system. This move is expected to benefit taxpayers by ensuring clearer rules around tax deductions at the source.

Boost for Senior Citizens: Tax Deduction Limit on Interest Doubled

In a major relief for senior citizens, the tax deduction limit on interest income has been doubled from Rs 50,000 to Rs 1,00,000. This change aims to ease the financial burden on senior citizens who rely on interest income from savings and fixed deposits.

Income Tax Exemption Limits Over the Years

Over the years, the income tax exemption limits have progressively increased to provide relief to taxpayers. Below are the key milestones in income tax exemption limits:

• 2005: Exemption limit of Rs 1 lakh
• 2012: Exemption limit raised to Rs 2 lakhs
• 2014: Exemption limit further increased to Rs 2.5 lakhs
• 2019: Exemption limit increased to Rs 5 lakhs
• 2023: Exemption limit raised to Rs 7 lakhs
• 2025: Exemption limit now set at Rs 12 lakhs

These revisions are expected to significantly enhance the disposable income of middle-class taxpayers and align with the government’s goal of ensuring equitable tax burdens.