Union Budget 2025: Rebate Limit enhanced to Rs.60000 under New Tax Regime

The Union Budget 2025-26 presented by the Union Finance Minister Nirmala Sitharaman today in the parliament. This Budget brought major changes in direct taxation. Various measures has been taken to make the new tax regime more appealing and benefited for taxpayers.

New slab rates has been introduced under New Tax Regime for FY25-26 [AY26-27], wherein Income up to Rs.12 Lakh p.a. will be tax free. Basic Exemption limit increased from Rs.3 Lakh to Rs.4 Lakh. The revamping of tax slabs is part of a bigger effort to simplify the tax structure and reduce the financial burden on taxpayers, making it easier for citizens to comply with tax laws.

With the above change, the government has announced an increase in the income tax rebate limit under Section 87A under New Tax Regime of the Income Tax Act. The new limit set to Rs.60000 for the income up to Rs.12,00,000 annually, previously the limit was Rs.25000 for the income up to Rs.7,00,000 per annum.

This increase is anticipated to give much-needed financial relief to many taxpayers by lowering their total tax burden and increasing disposable income.

However, the Finance Minister pointed out that this increased rebate benefit will not apply to income taxed under special tax rates.

This means that individuals having income subject to special tax rates, such as capital gains or certain other categories, will be ineligible for the rebate.