India’s New Income Tax Bill 2025: Slabs, NRI Benefits, Effective 2026

(INDIA) Parliament has passed the New Income Tax Bill, 2025, overhauling a six-decade-old framework and setting fresh rules that will shape how Indians and NRIs report income from the next financial year. The new tax slabs kick in for FY 2025-26 (income earned from April 2025 onward), while most provisions take effect from April 1, 2026. Current returns due on September 15, 2025 still use the old slabs. For millions of NRIs, especially those planning a return to India or managing cross-border income, the changes bring clearer rules, wider relief in some areas, and tighter digital checks.

Policy changes overview

The bill replaces the Income Tax Act, 1961 with a simpler code. Lawmakers say it strips out outdated provisions and reduces confusion without changing corporate tax rates or the overall tax administration structure.

The headline change is a new set of tax slabs for FY 2025-26:

• ₹0 to ₹4 lakh: 0%
• ₹4 lakh to ₹8 lakh: 5%
• ₹8 lakh to ₹12 lakh: 10%
• ₹12 lakh to ₹16 lakh: 15%
• ₹16 lakh to ₹20 lakh: 20%
• ₹20 lakh to ₹24 lakh: 25%
• Above ₹24 lakh: 30%

Under the new regime:

• The tax-free income threshold is raised to ₹12 lakh.
• Salaried workers get a ₹75,000 standard deduction, effectively making income up to ₹12.75 lakh tax-free.

According to analysis by VisaVerge.com, this structure should ease the burden at lower income levels while keeping higher rates for upper brackets — a design that matters for NRIs with India income plus earnings abroad.

Other notable measures affecting cross-border families:

• A 30% standard deduction on house property income will be calculated after municipal taxes are deducted, aligning with long-standing practice and helping landlords, including NRIs renting out Indian property.
• Tax Collected at Source (TCS) on education loans is now zero, easing flows for students going abroad.
• The Liberalised Remittance Scheme (LRS) limit rises to ₹10 lakh per financial year, supporting higher overseas remittances for education and other needs.

Refinements around refunds and TDS:

• Refunds will be allowed even if a return is filed late or revised, removing a clause that previously tied refunds only to on-time filings. This change helps taxpayers who miss deadlines due to illness or technical issues.
• The government has reinstated “Nil” TDS certificates, important for people with low taxable income or those using Double Taxation Avoidance Agreement (DTAA) benefits to prevent unnecessary deductions at source.

Compliance and enforcement:

• From 2026, digital compliance and search powers expand, giving authorities stronger tools to follow money trails and spot risk. Expect better data matching across reports, bank records, and foreign transfers.
• NRIs should anticipate closer scrutiny of remittances, property records, and credit claims.

Key takeaway: the new code simplifies rates and some reliefs, but strengthens digital oversight — plan documentation and timing carefully.

Impact on NRIs and returning residents

Timing of return plans will matter more under the new rules. Many returning Indians choose RNOR (Resident but Not Ordinarily Resident) status to limit India tax on certain foreign income for a limited window.

Important considerations:

• The new slabs, clearer property rules, and the ₹75,000 standard deduction can change tax bills significantly depending on when you return (e.g., April 2025 vs. after March 2026).
• Higher slabs at the top (beyond ₹24 lakh) remain, preserving progressive taxation for top earners.

Example scenario:

• A U.S.-based engineer moving back to Bengaluru in June 2025 who qualifies as RNOR may keep her foreign salary out of India tax under RNOR rules, while India salary and rental income are taxed under the new slabs.
• The post-municipal-tax 30% deduction on rent can reduce tax on rental income.
• Funds sent for settling in under the ₹10 lakh LRS fit within the increased limit.
• A sibling taking a U.S. master’s education loan benefits from zero TCS on education loans.

On Nil TDS certificates and refunds:

• NRIs with DTAA protection on interest or taxpayers below exemption levels can apply for nil deduction to avoid funds being locked up.
• With refunds allowed for belated or revised returns, the relief is broader — though cash timing still matters.

Documentation and compliance readiness:

• Enhanced digital checks from 2026 will raise the bar on documentation. Keep the following ready:
  • Bank statements
  • Loan letters and disbursal records
  • Property tax receipts and municipal tax payments
  • Rent agreements
  • DTAA residency proofs
  • Tuition invoices for students

Warning: the 30% deduction on house property income now clearly applies after municipal taxes — so municipal tax receipts are essential.

The bill does not change corporate tax rates or penalties, so company-side costs remain stable. For employers, the widened slabs and ₹75,000 standard deduction simplify payroll handling for NRI hires and returning residents.

Implementation timeline and compliance notes

Legislative path and dates:

• Original bill introduced in February 2025 was withdrawn in August after a select committee proposed over 200 changes.
• The revised Income-Tax (No. 2) Bill, 2025, with 285 recommendations, passed Lok Sabha on August 11, 2025, and Rajya Sabha on August 12, 2025.
• The law comes into force on April 1, 2026, but the tax slabs apply from FY 2025-26 (income earned from April 2025).

Key compliance pointers:

• Returns for FY 2024-25 are due September 15, 2025 and use the old slabs.
• Income from April 2025 faces the new tax slabs.
• Expect stronger digital compliance and wider search powers from 2026.
• Refund claims will be allowed for belated and revised returns.
• “Nil” TDS certificates return for low or exempt income and DTAA cases.

Practical steps for NRIs (recommended):

1. Check your days in India and confirm your status (NRI vs RNOR vs Resident) before each financial year starts.
2. Map foreign income streams to DTAA rules and track where income is taxable.
3. For rentals, pay municipal taxes on time and keep receipts to claim the 30% deduction correctly.
4. For education funding, plan remittances within the ₹10 lakh LRS limit and maintain loan and fee records.
5. Keep payroll informed of the ₹75,000 standard deduction and slab changes to avoid excess TDS.

Officials will publish detailed rules and FAQs closer to April 2026. For official updates, visit the Income Tax Department at https://www.incometax.gov.in. VisaVerge.com reports that further circulars will likely explain documentation for nil TDS, how refunds on late returns will be processed, and how the expanded search powers will work in practice.

Practical implications for US–India families

For families split between the United States 🇺🇸 and India, decisions go beyond rates:

• New rules affect school plans, mortgage decisions, and the timing of relocating savings.
• The bill aims to provide clearer guidance on property taxation, refunds, and TDS while keeping higher rates for top earners.
• With income from April 2025 falling under the new schedule, NRIs should:
  • Put a calendar in place now,
  • Talk to employers and lenders,
  • Keep records ready before the next filing cycle begins.

Final note: The New Income Tax Bill, 2025 offers clearer lines and some immediate reliefs for lower and middle incomes, but it also increases administrative scrutiny. Early planning and good documentation will help NRIs and returning residents make the most of the changes.