Finance minister Nirmala Sitharaman has finally introduced a drastic shift in Union Budget 2025 which was announced on Saturday. For the new tax regime, it has been announced that those earning an amount less than ₹12 lakh a year are not supposed to pay income tax. In case of salaried persons, a standard deduction of ₹75,000 makes this amount up to ₹12.75 lakh non-taxable.
Tax Slab Under New Scheme:
- From 0-4 lakh: Nil
- Between 4 lakh to 8 lakh rupees: 5%
- Rs. 8–12 Lakh 10%
- Rs. 12–16 Lakh 15%
- Rs. 16–20 Lakh 20%
- Rs. 20–24 Lakh 25%
- Rs. More than 24 lakh 30%
During the announcement, Nirmala Sitaraman said, “I am now happy to announce that there will be no income tax payable up to income of ₹12 lakh [i.e. average income of ₹1 lakh per month other than special rate income such as capital gains] under the new regime,”.
Listing changes in tax slabs, the Finance Minister informed that incomes up to ₹4 lakh would not be taxed, ₹4 to 8 lakh would host 5% taxation rate, ₹12-16 lakh 10%, ₹12-16 lakh 15%, ₹16-20 lakh 20%, ₹20-24 lakh 25% and incomes above ₹24 lakh 30%.
Vedanta Chairman Anil Agarwal welcomed the move and took to X saying “The Budget has hit the perfect note, providing great relief to the middle-class by making incomes up to ₹12 lakh per annum completely tax-free. This is the biggest section of the middle-class. It has also significantly reduced the tax burden for incomes up to ₹24 lakh.”
With this the government hopes that the reduction of tax burden will stimulate household consumption, savings, and investments. It will also give a boost to sectors like manufacturing, mining, and agriculture. “We have made a decisive move to a world-class tax system which will be simple, transparent and friendly to taxpayers,” the minister added.
Some social media users pointed out that if the income comes below ₹12 lakh, whatever computation of tax under the slabs will be offset by rebate under section 87A. For people earning above ₹12 lakh, tax shall start as per the new slab rates without the rebate of section 87A. The overall implication of the new tax regime is to ease the tax burden on the middle class to accelerate economic growth.
