Income Tax Bill 2025: New Deductions & Exemptions You Must Know
With the introduction of the Income Tax Bill 2025, taxpayers in India are set to experience significant changes in deductions, exemptions, and overall tax filing rules. Whether you’re a salaried employee, self-employed professional, or a business owner, understanding these updates can help you save more money and plan taxes better.
In this article, we’ll break down what’s new, the major deductions, exemptions, and how you can make the most of the new rules.
1. What is the Income Tax Bill 2025?
The Income Tax Bill 2025 is a revised version of the Indian tax law aimed at simplifying compliance, encouraging investments, and providing relief to middle-income taxpayers. It introduces new deduction limits, updated exemption categories, and streamlined filing procedures.
The government’s focus this year is on:
- Increasing disposable income for the middle class
- Boosting investments in housing, insurance, and renewable energy
- Encouraging digital tax filing through automation
2. Key Highlights of the Income Tax Bill 2025
Here’s a quick overview of the most important changes:
- Higher Standard Deduction – From ₹50,000 to ₹75,000 for salaried employees.
- Section 80C Limit Increase – Raised from ₹1.5 lakh to ₹2 lakh.
- New Green Investment Deduction – Tax benefits for investments in renewable energy projects.
- Updated HRA Rules – Higher exemption limits for metro cities.
- Digital Filing Incentives – Additional ₹5,000 rebate for e-filing before the deadline.
3. New Deductions in Income Tax Bill 2025
a) Standard Deduction – ₹75,000
Salaried employees and pensioners can now claim a higher standard deduction, giving more relief from taxable income.
Example: If your annual salary is ₹8 lakh, your taxable income after this deduction would be ₹7.25 lakh.
b) Section 80C – ₹2 Lakh Limit
Popular investments under PPF, EPF, ELSS, and NSC now have a higher combined limit, allowing more tax savings.
c) Green Investment Deduction – Up to ₹50,000
If you invest in solar panels, electric vehicles, or renewable energy bonds, you can claim up to ₹50,000 as a deduction.
d) Health Insurance Deduction – Section 80D
The deduction for medical insurance premiums has increased:
- Self + Family: ₹30,000
- Parents (Senior Citizens): ₹60,000
4. Updated Exemptions in 2025
a) House Rent Allowance (HRA)
Metro city HRA exemption limits have increased to match rising rents. Now, 50% of salary is exempt for metro residents, up from 40%.
b) Leave Travel Allowance (LTA)
Employees can claim two domestic trips in four years, but now the exemption amount has increased by 20%.
c) Agricultural Income Exemption
The exemption limit for agricultural income remains unchanged but now includes digital farming income.
5. Who Benefits the Most?
The biggest winners are:
- Salaried employees – Higher deductions mean lower taxable income.
- Green investors – First-time tax benefits for renewable energy investments.
- Senior citizens – Higher medical expense deductions and simpler filing process.
6. How to Maximise Benefits Under Income Tax Bill 2025
Here’s how you can make the most of the new provisions:
✅ Claim the full ₹2 lakh under Section 80C by investing in a mix of PPF, ELSS, and tax-saving FDs.
✅ Invest in renewable energy like rooftop solar panels to get an extra ₹50,000 deduction.
✅ Pay for health insurance for yourself and parents to claim maximum under 80D.
✅ File taxes early to get the ₹5,000 e-filing rebate.
ALSO READ-2025 Tax Bill Changes: 5 Legal Hacks to Pay Less
7. Filing Process – Faster & Digital
The new bill introduces auto-pre-filled ITR forms linked with PAN and Aadhaar. This means:
- Less manual data entry
- Instant validation of deductions
- Faster refunds
8. Common Mistakes to Avoid
Even with new benefits, avoid these tax filing errors:
- Missing investment proof submission
- Claiming deductions twice for the same expense
- Filing under the wrong ITR form
9. Final Thoughts
The Income Tax Bill 2025 is a welcome change, especially for middle-class taxpayers. With higher deductions, new exemptions, and digital filing perks, you can save more while filing taxes more easily.
10. Quick FAQ on Income Tax Bill 2025
Q1: What is the new Section 80C limit?
A: ₹2 lakh (up from ₹1.5 lakh).
Q2: Is there a rebate for early filing?
A: Yes, ₹5,000 for e-filing before the deadline.
Q3: Can I claim deduction for buying an electric car?
A: Yes, under the new Green Investment Deduction (up to ₹50,000).
Q4: Are senior citizens getting extra benefits?
A: Yes, higher health insurance deduction and simplified filing.
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