Comprehensive Guide to Income Tax Threshold Limits for AY 2025-26
The Income Tax Act for Assessment Year (AY) 2025-26 outlines critical updates to tax slabs, deductions, surcharge rates, and provisions under both old and new tax regimes. This guide simplifies these provisions, helping individuals, businesses, and professionals manage their taxes efficiently.
Tax Slabs for AY 2025-26
Old Tax Regime Tax Rates
| Income Slab (₹) | Tax Rate |
|---|---|
| 0 – 2,50,000 | Nil |
| 2,50,001 – 5,00,000 | 5% |
| 5,00,001 – 10,00,000 | 20% |
| Above 10,00,000 | 30% |
New Tax Regime Tax Rates
| Income Slab (₹) | Tax Rate |
|---|---|
| 0 – 3,00,000 | Nil |
| 3,00,001 – 7,00,000 | 5% |
| 7,00,001 – 10,00,000 | 10% |
| 10,00,001 – 12,00,000 | 15% |
| 12,00,001 – 15,00,000 | 20% |
| Above 15,00,000 | 30% |
Surcharge and Cess
Surcharge Rates
| Income Range (₹) | Surcharge Rate |
|---|---|
| 50 lakh – 1 crore | 10% |
| 1 crore – 2 crore | 15% |
| 2 crore – 5 crore | 25% |
| Above 5 crore | 37% (capped at 25% under the new regime) |
Cess
A uniform 4% cess applies to the total tax (including surcharge).
Salary Deductions
| Category | Old Regime (₹) | New Regime (₹) |
|---|---|---|
| Standard Deduction | 50,000 | 75,000 |
Deductions for House Property
- Eligible Deductions:
- Property tax and interest on borrowed capital (for construction or acquisition).
- Water charges are excluded from deductions.
- Standard Deduction:
- 30% of the annual rental value.
Business and Professional Income (Sections 44AA and 44AB)
Section 44AA: Maintenance of Accounts
Applicability:
- Applies to specified professions (e.g., legal, medical, engineering, architecture, etc.).
- Mandatory if:
- Turnover exceeds ₹25 lakh in any of the preceding three years.
- Income exceeds ₹2.5 lakh in any of the preceding three years.
Records to Maintain:
- Cashbook, journal (for mercantile accounting), ledger, and inventory details.
Section 44AB: Tax Audit
Applicability:
- Businesses with a turnover exceeding ₹1 crore (or ₹10 crore if cash transactions are <5%).
- Professionals with gross receipts exceeding ₹50 lakh in a financial year.
Audit Process:
- Conducted by a Chartered Accountant.
- Reports submitted in Form 3CA/3CB and Form 3CD.
Exemptions:
- Taxpayers opting for presumptive taxation under Section 44AD or Section 44ADA are generally exempt unless conditions are violated.
Presumptive Taxation Scheme
- For Businesses (Section 44AD):
- Income is deemed at 8% of turnover (or 6% for digital transactions) for turnover ≤ ₹2 crore.
- For Professionals (Section 44ADA):
- Income is deemed at 50% of gross receipts for receipts ≤ ₹50 lakh.
Capital Gains Tax
Long-Term Capital Gains
| Investment Type | Exemption/Limit |
|---|---|
| NHAI or REC bonds | Exemption up to ₹50 lakh |
| Equity shares/mutual funds | Exemption up to ₹1.25 lakh (post 23.07.2024) |
Short-Term Capital Gains
- Tax Rate: 20% on equity shares and equity-oriented mutual funds.
Important Cash Transaction Limits
- Cash payments exceeding ₹10,000 per day are disallowed as business expenses.
- For presumptive taxation, cash receipts must be less than 5% of total receipts to qualify for higher turnover limits.
Why This Matters
The Income Tax Act for AY 2025-26 provides clear and updated guidance for managing tax liabilities under old and new regimes. By understanding these provisions, taxpayers can make informed decisions to optimize their financial outcomes and remain compliant with the law.
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