People Will Have More Money in Hand Starting 1st April 2025: Know Three Reasons

As of April 1, 2025, the new financial year 2025-26 is beginning. The multiple policies declared recently have shown an increment in the disposable income of taxpayers across the country. This article discusses the major three reasons why, from the start of the new financial year 2025-26 on April 1, 2025, people will have more money in hand.

Tax Slab and Rate Changes

• From April 1, 2025, the income tax slab and rate changes under the new tax regime, declared in Budget 2025, will come into force.
• Taxpayers who go for the new tax regime won’t have to pay any tax on incomes up to Rs.12 lakh. Additionally, thanks to a rule called “marginal tax relief,” people with income just above Rs.12 lakh will either pay very little or no tax at all. However, the Rs.12 lakh tax-free limit doesn’t apply to income from certain assets that have their own special tax rates in the Income-tax Act.
• The tax-free income limit is Rs.12.75 for the salaried employees because of a Rs.75,000 standard deduction in the new tax system. Employers will not deduct any advance tax from employees whose taxable salary is Rs.12.75 lakh or less. As a result, these employees will receive a higher monthly take-home pay.
• Individuals in higher income brackets choosing the new tax regime will save upto Rs.1 lakh. The higher tax-free income limit means that taxpayers will have more money in their hands.

RBI Repo Rate Reduction

• The Reserve Bank of India (RBI) announced a reduction in the repo rate to 0.25% in February. The repo rate is the interest rate at which the central bank lends money to the commercial banks to fulfil their short-term needs. If the repo rate is reduced, commercial banks will now need to pay a low interest rate on repo rate-linked floating loans. Therefore, commercial banks will now have more money in their hands.
• This will also benefit normal people, as commercial banks will also reduce their interest rates when offering loans to borrowers, like home loans and auto loans. It is anticipated that the RBI will further reduce the repo rate as inflation has also reduced.
• In a report, SB Research said, moving forward, they expect that the CPI inflation may decrease to 3.9% in the fourth quarter of FY25 and average 4.7% for the entire year. For FY26, inflation could range between 4.0% and 4.2%, with core inflation between 4.2% and 4.4%. Since inflation is expected to stay low this month and in the future, we believe that there could be a total interest rate cut of at least 0.75% over time. These rate cuts may happen in phases, with the first cuts in April and August 2025. After a break in August 2025, the rate cuts could resume starting in October 2025.

Higher TDS Limits

• The TDS Limit has increased for various transactions, such as rents and deposits. This change will be implemented from April 1, 2025, as announced in Budget 2025.
• For general citizens, the Tax Deducted at Source (TDS) will not be deducted on deposits till Rs.50,000 interest income; for senior citizens, it will be till Rs.1 lakh. Before, these limits were Rs.40,000 and Rs.50,000 for General and Senior citizens, respectively.
• The Tax Deducted at Source (TDS) under Section 194-I will not be deducted in the case of rental income if the rent per month or a part of the month is Rs.50,000 (Rs.6 lakh/year). Before, this limit was Rs.2.4 lakh per year. TDS under Section 194-I is a tax that is deducted when you rent out a property to a company, and the rent paid by the company is above a certain limit set by the government.
• For people sending money abroad under the RBI’s Liberalized Remittance Scheme (LRS), no TDS will be deducted on transfers up to Rs.10 lakh. Previously, the limit was Rs.7 lakh.