Budget 2025: Save up to Rs 1.10 lakh on Rs 24-50 lakh, Rs 90,000 on Rs 20 lakh and Rs 50,000 on Rs 16 lakh under new tax regime

Finance Minister Nirmala Sitharaman has revised the slabs under the new tax regime, bringing significant savings for taxpayers. The revised structure offers no tax on income up to Rs 12 lakh. 

Under the new tax slabs, income up to Rs 4 lakh is tax-free. The tax rate is 5% for income between Rs 4 lakh and Rs 8 lakh, 10% for Rs 8 lakh to Rs 12 lakh, and 15% for Rs 12 lakh to Rs 16 lakh. For income between Rs 16 lakh and Rs 20 lakh, the tax rate is 20%, while it rises to 25% for Rs 20 lakh to Rs 24 lakh. Any income above Rs 24 lakh is taxed at 30%.

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As per the revised rate a person earning between Rs 24 lakh and Rs 50 lakh can save up to Rs 1.10 lakh, while those with an income of Rs 16 lakh can save Rs 50,000. For an income of Rs 20 lakh, the savings amount to Rs 90,000.

These revisions make the new tax regime more appealing, especially for middle- and high-income earners, offering them greater tax savings and a simplified structure.

“Personal tax proposals are focused on middle class. Basic exemption limit to be enhanced to Rs 12 lakh for new regime. Effectively, no tax upto Rs 12.75 lakh due to standard deduction. Big respite for middle class taxpayers. This will increase in hand income, thereby increasing savings and spending power. This will in turn boost the economy,” said Yogesh Kale, Executive Director, Nangia Andersen LLP

Source: Budget Document

The finance minister also said that a new income tax bill will be tabled in the next week in Parliament. 

The 30% income tax slab was fixed at Rs 15 lakh since 2020. It is expected that it would leave taxpayers with more disposable income, potentially boosting consumer spending—a vital driver of economic growth.  

By July 31, 72.8 million Income Tax Returns (ITRs) were filed for Assessment Year (AY) 2024-25, marking a 7.5% increase from last year’s count of 67.7 million, per Press Information Bureau data. Out of that, 72% of taxpayers, or about 52.7 million people, chose the new system, marking a significant shift.

Taxpayers claim the primary attraction of the new regime lies in its straightforward approach. They are no longer required to calculate and claim multiple exemptions and deductions, such as Leave Travel Allowance (LTA), House Rent Allowance (HRA), and Section 80C benefits. By eliminating these complexities, the NTR simplifies the tax-filing process.

The NTR is particularly beneficial for those with simpler income structures who lack significant investments in tax-saving instruments. High-income earners also prefer the new regime. For those with an income of Rs 5 crore and above, the surcharge of 37% is reduced to 25%

Another big reason for the jump in taxpayers opting for the NTR has been the decision to make it the default choice. “Earlier, the old tax regime was the default tax regime. But recently, the finance minister made the new tax regime the default one. So, if you don’t exercise the choice of selecting a tax regime, it would be the new tax regime by default. This has given a big impetus to wide adherence to the new tax regime,” told Sujit Bangar, Founder of tax filing platform TaxBuddy.com.