Finance Minister Nirmala Sitharaman on Sunday presented her ninth straight Union Budget and said that there will be no change in income tax slabs, an announcement that is closely watched by millions of taxpayers across the country every budget.
The Prime Minister Narendra Modi-led government had last year announced that no income tax will be payable on income of Rs 12 lakh a year under the new income tax regime, which offers lower tax rates without the benefit of claiming exemptions and deductions.
The tax rates applicable under this regime are 5 per cent of income between Rs 4-8 lakh, 10 per cent (Rs 8-12 lakh), and 15 per cent (Rs 12-16 lakh). Tax at a 20 per cent rate is applicable on income between Rs 16-20 lakh, 25 per cent (Rs 20-24 lakh), and 30 per cent on income above Rs 24 lakh.
Nirmala Sitharaman, in her budget speech on Sunday, said the Income Tax Act, 2025, will be implemented from April 1, and rules and tax return forms will be notified shortly.
Beginning April 1, the Income Tax Act, 2025, will come into force, replacing the six-decade-old tax law, and the changes made in tax laws in the 2026-27 budget will be incorporated in the new legislation.
"This (direct tax code) was completed in record time, and the Income Tax Act 2025 will come into effect from April 1, 2026. The simplified income tax rules and forms will be notified shortly, giving adequate time to taxpayers to acquaint themselves with their requirements," she said.
The forms have been redesigned so that ordinary citizens can comply without difficulty, she added.
The 2025 I-T law is revenue neutral with no change in tax rates. It has only made direct tax laws simple to understand, removed ambiguities, thereby reducing scope for litigations. It reduces text volume and sections by about 50 per cent vis-a-vis the 1961 Income Tax Act.
The new law simplifies the tax timeline by doing away with the distinction between the assessment year and the previous year, replacing it with a single "tax year" framework. It also allows taxpayers to claim TDS refunds even when ITRs are filed after deadlines, without any penal charges.
Meanwhile, Sitharaman also proposed a tax holiday till 2047 for foreign companies that provide cloud services to customers worldwide by using data centres in the country.
The tax holiday will be extended to the entities concerned subject to certain conditions.
Sitharaman said there is a need to enable critical infrastructure and boost investment in data centres.
"I propose to provide a tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India," the minister said.
To avail the tax holiday, companies need to provide services to Indian customers through an Indian reseller entity.
