In Budget 2025, Finance Minister Nirmala Sitharaman has introduced new income tax slabs under the revised new tax regime, making annual income up to ₹12 lakh completely tax-free.
This move provides substantial relief, particularly to middle-income earners, by reducing tax liabilities and increasing disposable income. For salaried individuals, the effective tax-free threshold rises to ₹12.75 lakh, factoring in the ₹75,000 standard deduction.
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Under the new structure, the tax rates are as follows:
0% on income up to ₹4 lakh 5% on income from ₹4 lakh to ₹8 lakh 10% on income from ₹8 lakh to ₹12 lakh 15% on income from ₹12 lakh to ₹16 lakh 20% on income from ₹16 lakh to ₹20 lakh 25% on income from ₹20 lakh to ₹24 lakh 30% on income above ₹24 lakh
Key Tax Changes
Higher TDS Exemption on Rent – The Tax Deducted at Source (TDS) limit on rent has been raised from ₹2.40 lakh to ₹6 lakh, providing relief to tenants and landlords.
Liberalised Remittance Scheme (LRS) Threshold Hiked – The TCS threshold for foreign remittances has increased from ₹7 lakh to ₹10 lakh, easing compliance for those sending money abroad.
Senior Citizen Benefits – The tax deduction limit on interest income for senior citizens has been doubled from ₹50,000 to ₹1 lakh, reducing their taxable income.
Self-Occupied Property Relief – Taxpayers can now claim two self-occupied properties as having nil annual value, removing previous restrictions.
Eased Compliance for Charitable Trusts – The registration period for small charitable trusts and institutions has been extended from 5 years to 10 years, reducing administrative burdens.
Updated Returns Window Extended – Taxpayers can now file updated income tax returns up to four years, instead of the previous two-year limit.
New Income Tax Bill Incoming – Sitharaman has also announced a new Income Tax Bill to be introduced next week, aiming at simplifying tax compliance and reducing litigation.
The revised tax structure is expected to reduce the financial burden on middle-income groups, particularly those earning between ₹7-12 lakh annually. Lower tax rates across the ₹12-24 lakh range mean more take-home pay, which could boost consumer spending and stimulate economic growth. The simplified tax structure also eliminates the need for multiple deductions and exemptions, making tax filing easier and more transparent.
With these changes, the government aims to encourage formalization, simplify tax compliance, and promote economic growth. By making the new tax regime the default option, the system becomes more accessible for taxpayers while aligning with the government’s vision of increasing domestic consumption and economic stability.