Ayush Kumar Jaiswal
Finance Minister Nirmala Sitharaman, in her Union Budget 2025 speech, announced a major tax relief for the middle class by making income up to Rs 12 lakh tax-free. For salaried taxpayers, this exemption extends to Rs 12.75 lakh, factoring in the Rs 75,000 standard deduction. She emphasized that the new income tax regime will be simplified, with a special focus on benefiting middle-class taxpayers.
However, this exemption is conditional. Taxpayers must utilize various deductions under the Income Tax Act, such as Rs 1.5 lakh under Section 80CCC and an additional Rs 1.5 lakh for home loan interest payments, to avail of the benefit.
Sitharaman stated, “Taxpayers earning up to Rs 12 lakh of normal income (excluding special rate income like capital gains) will receive a rebate alongside the slab rate reduction, ensuring they pay no tax.” The announcement was met with enthusiastic applause from the treasury benches, led by Prime Minister Narendra Modi.
New Tax Slabs and Benefits
The finance minister introduced a revised tax structure aimed at making taxation more progressive and reducing the burden on taxpayers. The changes include:
- Income up to Rs 4 lakh – Now tax-free (previously Rs 3 lakh)
- Taxpayer with Rs 12 lakh income – Benefits from an Rs 80,000 tax reduction
- Taxpayer with Rs 18 lakh income – Gains Rs 70,000 in tax savings
- Taxpayer with Rs 25 lakh income – Enjoys a Rs 1,10,000 tax benefit
“Slabs and rates are being adjusted across the board to benefit all taxpayers. This new structure will significantly lower middle-class taxes, leaving more disposable income to boost consumption, savings, and investment,” Sitharaman stated.
Impact on Government Revenue
To implement these tax benefits, the government will forgo approximately Rs 1 lakh crore in direct tax revenue and Rs 2,600 crore in indirect tax revenue. Despite the revenue loss, the move is expected to drive economic growth by increasing household spending and investments.
Stay tuned for further updates and detailed tax calculations based on the new regime.
