The Union Budget 2025, presented on 01 February 2025, introduced significant updates to the new tax regime under Section 115BAC. The changes primarily target salaried taxpayers, professionals, and high-income individuals, making tax planning simpler yet effective. With the help of the Automatic Income Tax Preparation Software All-in-One in Excel for FY 2025-26, taxpayers can calculate and manage their liabilities seamlessly. Below, we provide a comprehensive guide on exemptions, deductions, tax slabs, and the latest provisions announced in Budget 2025.

What is the New Tax Regime for FY 2025-26 (AY 2026-27)?

The new tax regime, introduced in Budget 2020, offered lower tax rates but restricted exemptions and deductions. With the Union Budget 2025, the government enhanced its scope, making it more attractive for taxpayers. For FY 2025-26, the following income tax slabs apply:

Income Range (₹)	Tax Rate (%)
0 to 4,00,000	Nil
4,00,001 to 8,00,000	5%
8,00,001 to 12,00,000	10%
12,00,001 to 16,00,000	15%
16,00,001 to 20,00,000	20%
20,00,001 to 24,00,000	25%
Above 24,00,000	30%

Under this structure, income up to ₹4 lakh remains tax-free, and the highest marginal rate of 30% applies to income above ₹24 lakh.

Standard Deduction and Default Tax Regime

The government announced that the new tax regime is the default choice for salary withholding and tax calculations. Key highlights include:

• Salaried individuals can claim a standard deduction of ₹75,000, offering relief and effectively increasing the tax-free threshold to ₹12.75 lakh.
• Family pensioners can claim a standard deduction of ₹25,000, which was raised from ₹15,000 earlier.
• Taxpayers preferring deductions and exemptions of the old regime must opt for it explicitly.

Comparison of the New Tax Regime vs the Previous Year

FY / AY	Income Range (₹)	Tax Rate (%)	Rebate Limit (₹)
FY 2024-25 / AY 2025-26	0–3,00,000	Nil	7,00,000
	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%
FY 2025-26 / AY 2026-27	0–4,00,000	Nil	12,00,000
	4,00,001–8,00,000	5%
	8,00,001–12,00,000	10%
	12,00,001–16,00,000	15%
	16,00,001–20,00,000	20%
	20,00,001–24,00,000	25%
	Above 24,00,000	30%

Major Highlights of Exemptions and Benefits in Budget 2025

1. Increase in Tax Rebate Limit

The tax rebate under Section 87A increased to ₹12 lakh, providing complete tax relief for individuals earning up to ₹12.75 lakh (after standard deduction). This ensures zero tax liability for a large portion of the salaried middle class.

2. Increase in Basic Exemption Limit

The basic exemption limit rose from ₹3 lakh (FY 2024-25) to ₹4 lakh in FY 2025-26, offering additional relief to all taxpayers.

3. Section 80TTB Deductions and Standard Deductions

• Salaried individuals continue to enjoy a ₹75,000 standard deduction.
• Family pensioners can now claim a ₹25,000 deduction.
• No changes were made to other standard deductions.

4. Lower Surcharge for High-Income Earners

The surcharge on ultra-high incomes has been rationalised:

• Income above ₹5 crore, previously taxed at 37%, now attracts only 25% surcharge.
• This significantly reduces the effective tax rate for the wealthy.

5. Default Applicability of New Tax Regime

Employers will now deduct TDS under the new tax regime by default. However, employees can opt for the old regime by filing a declaration.

Exemptions and Deductions Not Allowed in the New Tax Regime

While the new regime simplifies tax filing, it removes most exemptions. Taxpayers cannot claim:

• HRA, LTA, and Professional Tax.
• Deductions under Section 80C, 80D, 80E, 80G, 80CCD(1B), etc.
• Interest on home loans for self-occupied properties.
• Special allowances like education allowance, helper allowance, and minor child income allowance.

Exemptions Available in the New Tax Regime

Certain specific exemptions and deductions remain available:

• Transport allowance for PwDs.
• Employer’s contribution to NPS under Section 80CCD(2).
• Leave encashment under Section 10(10AA).
• Gratuity under Section 10(10).
• VRS compensation under Section 10(10C).
• Interest on let-out property under Section 24.
• Family pension deduction under Section 57(iia).
• Deposits in Agniveer Corpus Fund under Section 80CCH(2).

 

Tax Savings Under the New Regime: Salary-Wise Comparison

Annual Salary	Tax Payable (Old Regime)	Tax Payable (New Regime)	Savings
₹5,00,000	₹0*	₹0*	—
₹7,00,000	₹44,200	₹0*	₹44,200
₹10,00,000	₹1,06,600	₹0*	₹1,06,600
₹12,00,000	₹1,63,800	₹0*	₹1,63,800
₹15,00,000	₹2,57,400	₹97,500	₹1,59,900
₹18,00,000	₹3,51,000	₹1,05,800	₹2,00,200
₹20,00,000	₹4,13,400	₹1,92,400	₹2,21,000
₹24,00,000	₹5,38,200	₹2,92,500	₹2,45,700
₹26,00,000	₹6,00,600	₹3,51,000	₹2,49,600

*Rebate under Section 87A applies up to ₹12 lakh.

Which Regime is Better – Old vs New?

• Choose Old Regime if:
  You have large deductions like HRA, 80C investments, medical insurance, and housing loan interest.
• Choose New Regime if:
  • You want a simplified structure without paperwork.
  • Your deductions are small (< ₹2–3 lakh).
  • Your income is up to ₹12.75 lakh (zero tax payable).

Conclusion

The Union Budget 2025 has made the new tax regime highly favourable for a large section of salaried and middle-income taxpayers. With higher exemption limits, enhanced rebates, and simplified compliance, individuals can benefit significantly. However, taxpayers must still compare both regimes before filing returns to ensure maximum tax savings. Tools like the Automatic Income Tax Preparation Software All-in-One in Excel for FY 2025-26 provide accurate and quick calculations, empowering taxpayers to make the right choice.

Download Automatic Income Tax Preparation Software All-in-One in Excel for FY 2025-26

To simplify compliance, the Automatic Excel-Based Income Tax Calculator helps taxpayers compute liabilities instantly. Key features include:

• Instant tax computation as per the Budget 2025 rules.
• An inbuilt salary structure for both Government and Non-Government employees.
• Automatic generation of Salary Sheet.
• HRA exemption calculation U/s 10(13A).
• Arrears Relief calculation U/s 89(1) with Form 10E.
• Automatic Form 16 (Part A & B)
• Excel-based Form 16 Part B preparation.

This makes it a one-stop solution for tax filing and compliance in FY 2025-26.

   

 

On September 01, 2025 by www.taxexcel.net

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 Ever received delayed salary payments or a bonus from past years and ended up paying more tax than expected? If yes, you’re not alone. Many salaried individuals in India face this challenge. But here’s the good news — there’s a smart way to reduce the tax burden on such arrears: Form 10E. Better yet, we’ll show you how to create an easy-to-use Excel-based Income Tax Arrears Relief Calculator for FY 2025-26. Think of it as your personal tax assistant — simple, effective, and stress-reducing.

Table of Contents

Sr#	Headings
1	What are Income Tax Arrears?
2	Why Do You Need Relief on Tax Arrears?
3	Understanding Section 89(1) of the Income Tax Act
4	What is Form 10E, and why is it Mandatory?
5	Common Scenarios Where Form 10E is Required
6	The Role of Excel in Tax Relief Calculations
7	How to Structure Your Excel Calculator
8	Step-by-Step Guide to Building the Calculator
9	What Data You’ll Need to Input
10	Sample Layout for the Excel Calculator
11	Tips for Accurate Arrears Calculation
12	Common Mistakes to Avoid
13	Benefits of Using Excel Over Manual Calculation
14	How to File Form 10E Online
15	Final Checklist Before Filing Your Return

1. What are Income Tax Arrears?

Income tax arrears refer to salary, pension, or bonus payments that are received late, typically for a previous financial year. These late payments can increase your current year’s income, sometimes pushing you into a higher tax bracket.

2. Why Do You Need Relief on Tax Arrears?

Paying taxes on income that was actually earned in earlier years at today’s tax rates can feel unfair, right? That’s exactly why Section 89(1) exists — to give you relief by recalculating the tax as if the income was received on time.

3. Understanding Section 89(1) of the Income Tax Act

This section allows taxpayers to claim relief when they receive arrears of salary, pension, or family pension. It ensures you pay tax only on the excess that results from receiving past payments today, not on the entire sum.

4. What is Form 10E, and why is it Mandatory?

Form 10E is the official form you must submit to claim relief under Section 89(1). Without it, your claim could be rejected. It’s like asking for a discount at a store — you need the coupon (in this case, the form) to get the benefit.

5. Common Scenarios Where Form 10E is Required

• Salary arrears due to pay revisions
• Pension arrears received after retirement
• Bonuses or incentives from previous years paid in the current year

If you’ve received any of the above in FY 2025-26, Form 10E is a must.

6. The Role of Excel in Tax Relief Calculations

Excel is like your pocket calculator on steroids. It can handle formulas, store data neatly, and even flag errors. Creating a calculator in Excel means faster, accurate results and fewer headaches.

7. How to Structure Your Excel Calculator

Your Excel calculator should have the following sheets or sections:

• Input Sheet: For your salary data
• Tax Computation: Automatically calculates old and new tax
• Relief Calculation: Compares taxes and shows the relief

Think of these as compartments in a toolbox — each one serves a purpose.

8. Step-by-Step Guide to Building the Calculator

1. Open Excel and create a new sheet.
2. Label the columns: Year, Income, Tax Rate, Tax Payable, etc.
3. Use formulas like =IF, =SUM, and =TAX to calculate your tax liability.
4. Link sheets so that data flows automatically between them.
5. Double-check calculations to ensure accuracy.

9. What Data You’ll Need to Input

• Total income for each relevant year
• Breakdown of arrears received
• Original tax paid (if any)
• Current year’s income and tax liability

Gathering this data beforehand will make your job easier and faster.

10. Sample Layout for the Excel Calculator

Year	Actual Income	Arrears	Total Income	Tax Payable
2023-24	₹6,00,000	₹0	₹6,00,000	₹32,500
2024-25	₹6,50,000	₹50,000	₹7,00,000	₹37,500

Highlight the differences and calculate the relief in a separate column or sheet.

11. Tips for Accurate Arrears Calculation

• Always split arrears year-wise
• Refer to Form 16 or the employer's certificate
• Use the official tax slabs of previous years
• Don’t round off too early — accuracy matters

12. Common Mistakes to Avoid

• Forgetting to file Form 10E before the return
• Mixing up years and tax slabs
• Not saving a backup of your Excel file
• Ignoring validation — use Excel's data check tools

13. Benefits of Using Excel Over Manual Calculation

Manual math is prone to errors. Excel:

• Reduces mistakes
• Speeds up calculations
• Helps visualise tax relief
• Can be reused every year with minor edits

It’s like using a GPS instead of asking for directions — faster, smarter, and way more reliable.

14. How to File Form 10E Online

1. Log in to the Income Tax e-filing portal
2. Go to ‘e-File’ > ‘Income Tax Forms’
3. Select Form 10E under Assessment Year 2026-27
4. Fill in the required details based on your Excel calculator
5. Submit and save the acknowledgement

15. Final Checklist Before Filing Your Return

• ✅ Arrears data compiled?
• ✅ Excel calculator verified?
• ✅ Form 10E filled and submitted?
• ✅ Return includes relief claim under Section 89(1)?
• ✅ Backup copy saved?

Tick all boxes and you’re good to go!

Conclusion

Tax arrears can be confusing, but they don’t have to be painful. With a bit of planning and the right tools — like an Excel-based calculator and Form 10E — you can take control and maximise your income while minimising your tax burden. It’s not magic, just smart planning.

FAQs

1. What happens if I don’t file Form 10E after claiming relief?
Your income tax return may be processed without granting the relief, increasing your tax liability.

2. Can I file Form 10E offline?
No, it must be filed online through the Income Tax Department’s official portal.

3. Is the Excel calculator a government tool?
No, it’s a personal tool you can create to simplify your calculations, but you must ensure accuracy.

4. Can pensioners also use this method for tax relief?
Yes, pensioners receiving arrears are also eligible for relief under Section 89(1).

5. Is it safe to reuse the same Excel template next year?
Yes, just update the figures and assessment year. Always double-check the tax slabs.

Download Automatic Income Tax Arrears Relief Calculator with Form 10E in Excel Format for the F.Y. 2025- 26

On April 30, 2025 by www.taxexcel.net

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