Important Income Tax Threshold Limits for AY 2025-26 for Individuals

Threshold Limits

The Income Tax Act for the Assessment Year (AY) 2025-26 introduces key threshold limits and provisions applicable to individuals, encompassing both the old and new tax regimes. Here’s a detailed overview of these provisions to help taxpayers understand their obligations under different scenarios:

1. Basic Exemption Limits

Old Tax Regime:

  • Income Slab: ₹0 – ₹2,50,000 – Tax Rate: Nil

  • Income Slab: ₹2,50,001 – ₹5,00,000 – Tax Rate: 5%

  • Income Slab: ₹5,00,001 – ₹10,00,000 – Tax Rate: 20%

  • Income Slab: Above ₹10,00,000 – Tax Rate: 30%

New Tax Regime:

  • Income Slab: ₹0 – ₹3,00,000 – Tax Rate: Nil

  • Income Slab: ₹3,00,001 – ₹7,00,000 – Tax Rate: 5%

  • Income Slab: ₹7,00,001 – ₹10,00,000 – Tax Rate: 10%

  • Income Slab: ₹10,00,001 – ₹12,00,000 – Tax Rate: 15%

  • Income Slab: ₹12,00,001 – ₹15,00,000 – Tax Rate: 20%

  • Income Slab: Above ₹15,00,000 – Tax Rate: 30%

2. Surcharge Rates

Surcharge applies to individuals based on total income:

  • ₹50 lakh to ₹1 crore: 10%

  • ₹1 crore to ₹2 crore: 15%

  • ₹2 crore to ₹5 crore: 25%

  • Above ₹5 crore: 37%

Under the New Regime, the maximum surcharge is capped at 25%. Additionally, for income chargeable under Sections 111A, 112, 112A, and dividend income, the surcharge is limited to 15%.

Cess: A 4% Health and Education Cess is applicable on the total of Income Tax and Surcharge.

3. Income from Salaries

Standard Deduction:

    • ₹50,000 under the Old Regime

    • ₹75,000 under the New Regime

4. Income from House Property

Taxpayers can claim deductions for:

  • Property Taxes Paid

  • Interest on Housing Loans (subject to specified conditions and limits)

5. Business and Professional Income

Maintenance of accounts is mandatory if:

    • Turnover exceeds ₹25 lakh, or

    • Income exceeds ₹2.5 lakh over the past three years.

  • Audit is required for income exceeding specified thresholds.

  • Cash payments above ₹10,000 per day are disallowed as expenses.

6. Presumptive Taxation

Small businesses and professionals can opt for presumptive taxation at predefined rates, simplifying compliance requirements.

Threshold Limits

7. Capital Gains Tax

  • Long-Term Capital Gains (LTCG): Tax rate is 12.5% for all assets after July 23, 2024.

  • Short-Term Capital Gains (STCG): Tax rate is 20% for equity shares and equity-oriented mutual funds after July 23, 2024.

  • Exemptions:

    • Investment in NHAI/REC Bonds: Up to ₹50 lakh

    • Investment in Equity Shares: Up to ₹1.25 lakh (conditions apply)

Read More: Guide to Setting Off and Carrying Forward Losses Under the Income Tax Act, 1961

The Income Tax Act for AY 2025-26 introduces provisions tailored to different income levels and categories. By understanding these thresholds and deductions, taxpayers can better plan their finances and ensure compliance. Always consult a tax professional for personalized guidance.

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