Tax-Budget 2025 LIVE: FM Nirmala Sitharaman said there will be no income tax payable up to income of 12 lakh -- giving a big relief to the middle class taxpayers.
The government has not only adjusted the income tax slabs but has also raised the tax rebate offered under Section 87A. As a result, individuals with a net taxable income of up to Rs 12 lakh will be exempt from paying any taxes.
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These changes to the income tax regulations are set to take effect in the new financial year 2025-26, beginning on April 1, 2025, pending approval by Parliament.
"The middle class provide strengths to the economy. In recognition of their contribution, we have periodically reduced the tax burdens. I am now happy to announce that there will be no income tax up to an income of Rs 12 lakhs," said Finance Minister Nirmala Sitharaman.
The new tax regime is the default tax regime. The new tax slabs under the New Tax Regime are:
Tax slabs Tax rate
Zero to Rs 4,00,000- No Tax Rs 4,00,000 to Rs 8,00,000--- 5% Rs 8,00,0001 to Rs 12,00,000---10% Rs 12,00,001 to 16 lakh rupees---15% Rs 16,00,001 to 20 lakh rupees---20% Rs 20,00,001 to 24 lakh rupees-- 25% Above 24 lakh--- 30%
The tax exemption list over the years:
2005: Rs 1 lakh
2012: Rs 2 lakhs
2014: Rs 2.5 lakhs
2019: Rs 5 lakhs
2023: Rs 7 lakhs
2025: Rs 12 lakhs
Adhil Shetty, CEO of Bankbazaar.com, said: "Big relief for taxpayers! Under the new tax regime, income up to ₹12 lakh will now be tax-free, significantly reducing the financial burden on the middle class. This bold move enhances disposable income, encourages spending, and promotes economic growth. By simplifying taxation and easing compliance, the government reinforces its commitment to a taxpayer-friendly system. This reform not only benefits salaried individuals but also supports businesses and investments, driving overall prosperity. With a focus on financial empowerment and ease of living, this tax relief is a major step toward a more inclusive and growth-oriented economy."
Sandeep Chilana, Managing Partner, CCLaw, said: “Raising the income tax exemption threshold to ₹12 lakh is a deeply positive move, especially for the middle class. For many, it brings a much-needed relief, considering the increasing living costs and pressures of inflation. By increasing disposable income, the government is not only simplifying the tax system but also fostering consumer confidence. This change will impact a broad spectrum of individuals, particularly in urban areas, giving them more room to invest and spend. The overall restructuring of tax slabs, aimed at a more equitable distribution, is also an encouraging step towards creating a progressive tax environment.”