Summary: The Revised New Income Tax Bill 2025 maintains a dual tax regime system, which has been criticized for causing confusion among taxpayers due to two separate sets of tax rates and rebates. Under the new regime, income up to Rs.4,00,000 is tax-free, with a progressive tax structure up to 30% for incomes above Rs.24,00,000. This regime offers a rebate of up toRs.60,000 for residents with income up to Rs.12,00,000, which gradually decreases for higher incomes. Conversely, the old tax regime keeps the basic exemption limit atRs. 2,50,000 for general citizens, with higher limits for senior and super senior citizens. While the old regime offers deductions for savings and investments, the new regime does not. The bill faces criticism for a lack of “marginal relief” under the old regime, where a small increase in income above theRs. 5,00,000 threshold can result in a significant tax liability. This dual system is also seen as conflicting with the government’s past emphasis on promoting a savings-based economy. The document suggests a simpler, single-regime approach with higher exemption limits and the reinstatement of deductions to promote savings.
Confusing Regimes Rates and Rebates in the New Income Tax Bill 2025
The Revised New Income Tax Bill retains the tax slabs announced in the Union Budget 2025 for individuals, Hindu Undivided Families, and other categories. The slabs under the new regime are:
| Income Range | Tax Rate |
| Up to Rs. 4,00,000 | No tax |
| Rs. 4,00,001 to Rs. 8,00,000 | 5 percent |
| Rs. 8,00,001 to Rs. 12,00,000 | 10 percent |
| Rs. 12,00,001 to Rs. 16,00,000 | 15 percent |
| Rs. 16,00,001 to Rs. 20,00,000 | 20 percent |
| Rs. 20,00,001 to Rs. 24,00,000 | 25 percent |
| Above Rs. 24,00,000 | 30 percent |
Rebate under Clause 156:
- For residents with total income up to Rs. 5 lakh, the rebate will be 100 percent of the income tax payable or Rs. 12,500, whichever is lower.
- Under the new regime, residents with incomes up to Rs. 12 lakh can claim a rebate of up to Rs. 60,000. For incomes above Rs. 12 lakh, the rebate amount will reduce gradually, capped at the tax payable.
There is no relief for Senior Citizens (above the age of 60 years) or for the Super Senior Citizens (above the age of 80 years) under the New Tax Regime
Old Tax Regime Rates (As per Income Tax Bill 2025)
| Category | Income Slab (Rs.) | Tax Rate |
| General Citizens (<60) | Up to 2,50,000 | Nil |
| 2,50,001 – 5,00,000 | 5% | |
| 5,00,001 – 10,00,000 | 20% | |
| Above 10,00,000 | 30% | |
| Senior Citizens (60–80) | Up to 3,00,000 | Nil |
| 3,00,001 – 5,00,000 | 5% | |
| 5,00,001 – 10,00,000 | 20% | |
| Above 10,00,000 | 30% | |
| Super Senior Citizens (80+) | Up to 5,00,000 | Nil |
| 5,00,001 – 10,00,000 | 20% | |
| Above 10,00,000 | 30% |
These rates are not explicitly revised in the new bill and are expected to be updated annually via the Finance Act, as per tradition.
Rebate Under the Old Tax Regime
- Eligibility: Resident individuals with net taxable income up to Rs. 5,00,000
- Maximum Rebate: Rs. 12,500
- Effective Tax Payable: Zero
Old Tax Regime followers are denied Marginal Relief if their income is marginally above Rs. 5 Lakhs, which is totally unfair. Rebate is available up to the taxable income of Rs. 5 Lakhs and they need not pay any tax if their income is Rs. 5 Lakhs. But if the income exceeds Rs. 5 Lakhs the rebate is not available they have to pay the tax from Rs. 2.5 lakhs onwards. For example, if the taxable income is Rs. 5,01,000 the tax payable including education cess will be Rs. 13,208, which is totally unfair; for an additional income of Rs. 1,000 the tax payable is Rs. 13,208. Marginal Relief should be given to the extent that the tax payable should be restricted to the income that exceeds Rs. 5 Lakhs.
While it is widely publicised that the New Act will be simple and easy to understand by the common man it is not understood why they are continuing the two regimes by prescribing two sets of taxation and rebates, which is confusing the assessees.
It seems that there is no logical reasoning to have the basic exemption limit under NTR at Rs. 4 lakhs by prescribing rates ranging from 5% to 10% up to Rs. 12 lakhs and allowing the entire tax as rebate for income up to Rs. 12 lakhs and under OTR keeping the exemption limit at Rs. 2.5 lakhs and allowing the entire tax as rebate for income up to Rs. 5 lakhs. In addition, denying the rebate if any special income (Capital Gains) is included in the total income is also not fair.
Instead, to have simplicity and to gain confidence amongst the tax paying public it is better to have only one tax regime i.e. the ‘OLD One’ due to the following reasons:
It is not understood as to why the Government is in favour of a ‘Spending Economy’ by discouraging SAVINGS which is considered to be a backbone of Indian Economy. In fact in the past the Government promoted savings by encouraging people to invest in the specified savings scheme including the payment of Life Insurance Premium and giving deductions for repayment of housing loans and in allowing deduction up to Rs. 2 lakhs for the loss under house property due to interest on Housing Loans. Many assessees have entered into long term commitment by purchasing Life Insurance Policies and have constructed houses by getting housing loans from the Banks and Housing Finance Companies on the belief that they will be able to save income tax under section 80C for the repayment of housing loan and premium for life insurance policies and for the interest on housing loans up to Rs. 2 Lakhs under the head ‘Income from House Property’. Now all of a sudden, these benefits were withdrawn putting the assessees in trouble who have purchased Life Insurance Policies and availed Housing Loans (which are long term commitment in the form of yearly payment of premium and repayment of housing loan with interest) mainly for the purpose of saving Income Tax believing that the Government will continue to give concessions to promote savings:
Suggested Rates of Tax
| Category | Income Slab (Rs.) | Tax Rate |
| General Citizens (<60) | Up to 8,00,000 | Nil |
| 8,00,001 – 12,00,000 | 5% | |
| 12,00,001 – 16,00,000 | 10% | |
| 16,00,001 – 20,00,000 | 15% | |
| 20,00,001 – 24,00,000 | 20% | |
| Above 24,00,000 | 25% |
Senior Citizens (60 years of Age) Exemption Limit Rs. 8,00,000
Super Senior Citizens (80 years of Age) Exemption Limit Rs. 12,00,000
All deductions will be allowed and there will be no Rebate.
Sur Charge and Education Cess should not be levied.
Author Bio
Nice Information,thank you sir.