Major Tax Changes for Salaried Employees: What You Need to Know
The government has introduced significant changes to India’s income tax structure, bringing clarity to deductions and tax slabs. Here’s a breakdown of the key updates affecting salaried individuals, as confirmed by the Finance Minister and now part of the new legislation.
Standard Deduction Increased for the New Tax Regime
A crucial update for those who choose the new tax regime is the increase in the standard deduction. Initially set at ₹50,000, it has now been officially enhanced to ₹75,000. This change was first introduced in the Finance (No. 2) Act, 2024, and has been solidified through the Taxation Laws (Amendment) Bill, 2025. This means salaried individuals in the new regime can now reduce their taxable income by a higher amount. The standard deduction for the old tax regime remains unchanged at ₹50,000.
Revised Tax Slabs for the New Regime
The New Income Tax Bill, 2025, which has been approved by Parliament, features a simplified tax slab structure for the new regime. These rates apply to individuals, HUFs, and other specified entities, and will be effective from April 1, 2026 (for the financial year 2026-27).
| Total Income (₹) | Rate of Tax |
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Tax Treatment for Pension Schemes
In a move to create a level playing field, the new amendments have also resolved ambiguity surrounding the Unified Pension Scheme (UPS). The new law ensures that the tax benefits for contributions to the UPS are now on par with those for the National Pension System (NPS), providing equal tax treatment for both retirement savings options.
These changes, finalized in the Taxation Laws (Amendment) Bill, 2025, and integrated into the New Income Tax Bill, 2025, represent a significant overhaul of the tax framework. The new law is set to be implemented from April 1, 2026, marking a new era of income tax for India.