In a major relief for middle-class taxpayers, Union Finance Minister Nirmala Sitharaman announced during the Budget 2025 session that individuals earning up to Rs 12 lakh annually will not be required to pay income tax under the new tax regime.
Revised Income Tax Slabs
The finance minister detailed changes in the income tax slabs, significantly lowering tax burdens for salaried individuals. The revised tax rates are as follows:
• Income up to Rs 4 lakh – No tax
• Rs 4 lakh to Rs 8 lakh – 5%
• Rs 8 lakh to Rs 12 lakh – 10%
• Rs 12 lakh to Rs 16 lakh – 15%
• Rs 16 lakh to Rs 20 lakh – 20%
• Rs 20 lakh to Rs 24 lakh – 25%
• Above Rs 24 lakh – 30%
Additionally, salaried individuals will benefit from a standard deduction of Rs 75,000, effectively making incomes up to Rs 12.75 lakh tax-free.
Impact on the Middle Class
This landmark change is expected to ease financial burdens on the middle class by increasing their purchasing power. The government aims to drive economic momentum by stimulating household consumption and enhancing investment opportunities.
“To taxpayers with incomes up to Rs 12 lakh (excluding special rate income such as capital gains), a tax rebate is being provided in addition to the slab rate reductions, ensuring that they do not have to pay any tax,” Sitharaman stated.
Boost to Economic Growth
The government’s decision to restructure tax rates aligns with its broader economic strategy to enhance disposable income among the masses. The policy shift is anticipated to benefit millions of taxpayers, fostering increased expenditure on goods, services, and investments.
