Income Tax in India 2025: Who Pays, Slab Rates & Deductions

Understanding Who Pays Income Tax in India

The authority to impose income tax in India continues to rest solely with the central government, as per the Constitution. Taxes are mandatory payments, not voluntary, and fund essential public services.

The Income Tax Act, 1961, still defines key terms: an assessee is anyone liable to pay tax or related dues, while a “person” can be an individual, company, firm, HUF, association, or even an artificial entity. The “assessment year” is the 12 months starting April 1, when income earned in the “previous year” is assessed. While the Income Tax Bill, 2025, is set to overhaul these definitions, the current framework remains in place until April 2026.

Income Classification and Deductions You Can Claim

Income is still classified under five heads: salary, house property, business/profession, capital gains, and other sources, which together form your gross total income.

Deductions under Sections 80C to 80U are crucial, but here’s the catch: the new tax regime, now the default from 2025, allows only a handful—primarily a standard deduction of ₹75,000 for salaried taxpayers, up from ₹50,000. Most classic deductions like 80C, 80D, HRA, and LTA are only available in the old regime, which you must opt for if you want to claim them. The new regime is simpler but less flexible for tax-saving investments.

Income Tax Slabs, Rebates, and Marginal Relief in 2025

The new tax regime brings major changes: zero tax on income up to ₹12 lakh, with a standard deduction boosting this to ₹12.75 lakh for salaried individuals. Slabs are now 0% up to ₹4 lakh, 5% for ₹4–8 lakh, 10% for ₹8–12 lakh, 15% for ₹12–16 lakh, 20% for ₹16–20 lakh, 25% for ₹20–24 lakh, and 30% above ₹24 lakh.

The Section 87A rebate is now ₹60,000, up from ₹12,500, making the higher zero-tax limit possible. Marginal relief ensures that a small increase in income above ₹12 lakh doesn’t result in a disproportionately high tax bill. The old regime’s slabs and deductions remain unchanged for those who opt in.

Special Tax Rates, Rounding Off, and Outdated Facts

Special incomes like long-term capital gains (LTCG) and short-term capital gains (STCG) are taxed at 10%, 20%, and 15% respectively, while casual income stays at 30%. Rounding off rules under Sections 288A and 288B still apply, rounding total income and final tax liability to the nearest ₹10.

Outdated facts include the old Section 87A rebate of ₹12,500 (now ₹60,000), the lower standard deduction (now ₹75,000), and the previous highest surcharge of 37% (now capped at 25%). The biggest update is the new regime’s higher zero-tax threshold and simplified structure, but the old regime is still available for those who prefer traditional deductions.

Making Your Income Tax Article Reach More People

To reach a wider audience, use keywords like “Income tax India 2025,” “new tax regime slab rates,” “income tax deductions,” “Section 87A rebate,” and “tax saving tips.” Write in a conversational, relatable style, answering common questions about the new regime, deduction changes, and tax-saving strategies. Highlight important updates in bold, structure your article with clear headings, and keep paragraphs concise for readability.

Always refer to official sources like the Income Tax Department for the latest updates, and remember: the new rules are designed to simplify taxes, but your choice between regimes should depend on your financial situation and tax-saving goals.