The Centre has mended the Income Tax Act, 1961, remedying a drafting mistakes that affected the same old deduction for salaried taxpayers in the financial year 2025-26. The Income tax bill 2025 changes aligns with Budget 2025 announcements, returning the same old deduction to Rs 75,000 for income as much as Rs 12.75 lakh under the new tax regime. The revised provisions offer big relief to salaried individuals that had been first of all deprived because of the error.
The Finance Act, 2025, introduced big changes to the tax rebate under Section 87A, increasing the tax-free salary threshold from Rs 7 lakh to Rs 12 lakh. This adjustment efficiently reduces the tax liability for incomes up to Rs 12 lakh to 0. However, the rebate does not apply to incomes taxed at special fees, which include short-term capital profits (STCG) and long-term capital gains (LTCG).
What finance minister spoke on Income tax bill 2025
Finance Minister Nirmala Sitharaman remarked on the amendments and said, “Providing clarity for the new Income Tax regime, where preferred deduction of Rs. 75,000 will clarified for salaried people.” This statement underlines the government commitment to making sure taxpayers acquire the meant benefits of the Budget 2025 measures.
Naveen Wadhwa, Vice President of Research and Advisory Division at Taxmann, informed the Economic Times: “I had mentioned that proviso to Section 16(ia) gave a reference to clause (ii) of section 115BAC(1A), which applies to the evaluation year 2025-26, however did not mention clause (iii), which governed the evaluation year 2026-27. Due to this omission, the improved deduction of Rs. 75,000 under the new tax regime did not available for the financial year months 2025-26. However, in the modern Taxation Laws (Amendment) Bill, 2025, as passed by Parliament, this drafting error is fixed.”
Changes performed
Under the new tax regime, the same old deduction allows taxable income to stand at Rs 12 lakh after deduction, with tax payable amounting to Rs 60,000. Taxpayers can then claim the Section 87A rebate of Rs 60,000, disposing of any overall tax liability. This trade makes the tax regime more beneficial for low income earners, adjusting tax obligations to better reflect their incomes contexts.
The Income tax bill 2025 explanatory memorandum similarly elaborates: “From assessment year 2026-27 onwards, for an assessee, being an character resident in India whose profits is chargeable to tax under the sub-phase (1A) of section 115BAC, it’s proposed to,–- Enhance the limit of total profits for rebate in clause (a) and (b) of first proviso under section 87A, on which the earnings-tax is payable as per the charges of income-tax under sub-segment (1A) of segment 115BAC, from Rs 7,00,000 to Rs 12,00,000 and the limit of rebate in clause (a) of first proviso to segment 87A from Rs 25,000 to Rs 60,000.”
Read also: Reliance Retail Purchase Home Appliance Brand Kelvinator To Grow in Consumer Durables Sector