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Dec 29, 2025
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Refunds, rebates and red flags: Why income taxpayers felt the heat in 2025
As 2025 draws to a close, most income taxpayers are likely to have bittersweet memories of the year. It started with a bang as Finance Minister Nirmala Sitharaman hiked the rebate limit under section 87A from Rs.7 lakh to Rs.12 lakh, basic exemption limit from Rs.3 lakh to Rs.4 lakh and rejigged tax slabs under the new tax regime. With these changes, the new regime will be beneficial for most taxpayers across income levels. Those with higher deductions, for instance, taxpayers with incomes of over Rs.24 lakh and total annual deductions of over Rs.8 lakh (this breakeven threshold will be lower for lower income groups) stand to save more under the old regime. The relevant sections include Section 10(13A) for house rent allowance, Section 80C for tax-saving deductions, Section 80D for health insurance premiums, and Section 24(b) for home loan interest, among others. Cut to the end of the year, however, and the cheer has lost its spark to an extent. This is thanks to the flurry of emails that the income tax department sent to taxpayers, flagging discrepancies' in their 1-T returns for the assessment year 2025-26. Here's what shaped your income tax landscape in 2025:
Budget 2025 bonanza
The Union Budget 2025 hiked the income tax rebate and the basic exemption limits under the new tax regime. Tax slabs were liberalised under the new tax regime. Salaried employees with incomes of up to Rs.12.75 lakh have to pay no tax, after factoring in the standard deduction of Rs.75,000. "This has increased their disposable income. Secondly, higher thresholds for tax deducted at source (TDS) have eased compliance; most notably, TDS on rent now applies only if the monthly rent exceeds Rs.50,000," says Sumeet Hemkar, Partner, Deloitte India. Moreover, the budget also effected rationalisation of Tax Collected at Source (TCS) on goods and foreign remittances under the liberalised remittance scheme (LRS).
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