In a major relief to taxpayers, Finance Minister Nirmala Sitharaman declared in the Union Budget 2025 that individuals earning up to ₹12 lakh annually would not be liable for income tax under the new tax regime. Addressing the Parliament in New Delhi on February 1, she emphasized the government’s commitment to easing the financial burden on the middle class.
With the inclusion of the standard deduction of ₹75,000, the effective tax-free income threshold extends to ₹12.75 lakh. “I am pleased to announce that under the new tax regime, there will be zero tax payable for incomes up to ₹12 lakh, ensuring greater financial flexibility for the middle class,” Sitharaman stated.
This initiative aligns with the government’s strategy to stimulate consumer spending and drive economic growth. By lowering tax obligations, citizens will have more disposable income, thereby encouraging investment and consumption across various sectors.
The Finance Minister also introduced a revised tax structure aimed at making taxation more progressive and efficient. The new tax slabs under the updated regime are as follows:
- Income up to ₹4 lakh: No tax
- Income between ₹4 lakh and ₹8 lakh: 5%
- Income between ₹8 lakh and ₹12 lakh: 10%
- Income between ₹12 lakh and ₹16 lakh: 15%
- Income between ₹16 lakh and ₹20 lakh: 20%
- Income between ₹20 lakh and ₹24 lakh: 25%
- Income above ₹24 lakh: 30%
To highlight the benefits of the revised structure, Sitharaman provided concrete examples. A taxpayer earning ₹12 lakh annually will now save ₹80,000 in taxes, while those earning ₹18 lakh and ₹25 lakh will see reductions of ₹70,000 and ₹1.10 lakh, respectively.
With this announcement, Sitharaman marked her eighth consecutive budget presentation, drawing closer to the record ten budgets presented by former Prime Minister Morarji Desai. Her proposal seeks to balance economic stability with fiscal prudence, focusing on tax relief for salaried individuals and strengthening consumption-driven growth.
As the country navigates economic challenges, this tax relief is expected to enhance financial confidence among citizens and propel market activity. The Union Budget 2025 reflects the government’s vision of an inclusive and progressive financial ecosystem that prioritizes taxpayer welfare while driving national prosperity.
