India's Union Budget 2025 offers significant income tax relief to the middle class, lowering tax burdens and increasing disposable income through revised slabs and a zero-tax threshold up to ₹12 lakh.


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Union Budget 2025: Good News for the Middle Class

The Union Budget 2025 brought significant changes to income tax slabs, delivering welcome relief to the middle class. Finance Minister Nirmala Sitharaman announced a major overhaul, aiming for "growth with fairness," and significantly lowering the tax burden for many. Notably, the new income tax regime introduces a zero tax liability for individuals earning up to ₹12 lakh annually (or ₹12.75 lakh for salaried individuals, considering the standard deduction).

Revised Tax Slabs: A Simplified Structure

The new tax slabs, effective from FY26 onwards, are designed to be simpler and more transparent. They are as follows:

  • Up to ₹4 lakh - Nil
  • ₹4-8 lakh – 5%
  • ₹8-12 lakh – 10%
  • ₹12-16 lakh – 15%
  • ₹16-20 lakh – 20%
  • ₹20-24 lakh – 25%
  • Above ₹24 lakh – 30%

This simplification, along with the increased tax-free threshold, aims to boost disposable income and stimulate consumption.

Marginal Relief: Protecting Taxpayers Near the Threshold

The budget also addresses concerns about taxpayers earning slightly above the ₹12 lakh threshold. Marginal relief ensures that the tax liability doesn't disproportionately impact those just above the limit. For example, an individual earning ₹12,10,000 would pay only ₹10,000 in tax, significantly less than the ₹61,500 calculated without the relief. This provision demonstrates a commitment to fairness and prevents a sudden jump in tax burdens.

Section 87A Rebate: Further Tax Benefits

The rebate under Section 87A has also been enhanced. Individuals with a net taxable income up to ₹12 lakh are now eligible, further reducing or eliminating their tax liability. This combined with the new slabs ensures that a large section of the population enjoys significant tax benefits.

A New Era of Tax Administration

Beyond the tax slab revisions, the government is implementing a new "PRUDENT" framework for tax administration. This initiative focuses on proactive and professional service, user-friendly processes, data-driven decision-making, and the use of technology for greater transparency.

Conclusion: A Budget Focused on Growth and Fairness

Budget 2025's income tax reforms represent a significant step towards a more equitable and growth-oriented tax system. The changes are intended to increase disposable income for a large segment of the population and create a more business-friendly environment. Use the Budget with ET Tax calculator to determine your exact tax liability under the new regime and plan your finances accordingly.

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