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The Union Budget for the Financial Year (FY) 2025-26 has brought forth significant changes and updates to the income tax regime for individuals, corporates, and non-corporates.
A. Income Tax for Individuals
1. Revised Income Tax Slabs under the New Tax Regime
The revised income tax slabs are as follows:
- Income up to ₹4,00,000: Nil (No tax)
- ₹4,00,001 to ₹8,00,000: 5%
- ₹8,00,001 to ₹12,00,000: 10%
- ₹12,00,001 to ₹16,00,000: 15%
- ₹16,00,001 to ₹20,00,000: 20%
- ₹20,00,001 to ₹24,00,000: 25%
- Above ₹24,00,000: 30%
2. Enhanced Tax Rebate under Section 87A
The rebate under Section 87A has been increased to ₹60,000. This means no tax on net income of 12L.
3. Increased Basic Exemption Limit
The basic exemption limit has been raised from ₹3,00,000 to ₹4,00,000.
4. Standard Deduction for Salaried Individuals
A standard deduction of ₹75,000 continues.
5. Employer Contribution to NPS
The contribution by employers to the National Pension System (NPS) Tier 1 accounts is eligible for a deduction of up to 10% for the employees.
B. Income Tax for Corporate Entities
The tax rates for corporate entities vary depending on their size, structure, and whether they opt for concessional tax schemes. Here's an overview of the tax provisions for FY 2025-26.
1. Domestic Companies
Domestic companies have the option to choose between the old tax regime, and the new concessional tax regimes under sections 115BA, 115BAA, and 115BAB.
For domestic companies not opting for the above concessional regimes, the tax rates are as follows:
- Turnover-Based Rate: If the total turnover or gross receipts during the previous year 2025-26 do not exceed ₹400 crore, the tax rate is 25%.
- Standard Rate: For all other domestic companies, the tax rate is 30%.
Surcharge and Cess:
- Surcharge: A surcharge is levied on domestic companies as follows:
- 7% if total income exceeds ₹1 crore but does not exceed ₹10 crore.
- 12% if total income exceeds ₹10 crore.
- Health and Education Cess: An additional cess of 4% is levied on the income tax payable, inclusive of surcharge.
Minimum Alternate Tax (MAT)
Domestic companies are subject to MAT if the tax payable under normal provisions is less than 15% of their book profit. The MAT rate is 15%, and for companies operating in International Financial Services Centres (IFSC) deriving income solely in convertible foreign exchange, the MAT rate is 9%.
2. Other Than Domestic Companies
For foreign companies operating in India, the income tax rate is 40% on total income, excluding income chargeable at special rates. .
Surcharge and Cess for Foreign Companies:
- Surcharge: The surcharge rates for foreign companies are:
- 2% if total income exceeds ₹1 crore but does not exceed ₹10 crore.
- 5% if total income exceeds ₹10 crore.
- Health and Education Cess: An additional cess of 4% is levied.
Income Tax for Non- Corporate Entities
Non-corporate entities, such as partnership firms and Limited Liability Partnerships (LLPs), are taxed at a flat rate of 30% on their total income plus surcharge.
