New Tax Slabs 2025: A monthly saving of Rs 9,500, middle class to have 5% more in cash in hand; check tax calculations

Income Tax Budget 2025: In the Budget for the year 2025-26, Finance Minister Nirmala Sitharaman introduced significant modifications to the Income Tax regime, including changes in rates and slabs. The adjustments are expected to result in savings ranging from Rs 80,000 to Rs 1.20 lakh for the middle-class earners. The Minister expanded the structure of the New Tax Regime by extending the initial slab from Rs 0–3 lakh to Rs 0–4 lakh, introducing a new slab at 25%, thus raising the total number of tax slabs to seven.

Under the revised tax system, a salaried individual earning Rs 25 lakh annually would pay a total tax amount of Rs 3.43 lakh after availing the standard deduction of Rs 75,000, as opposed to Rs 4.57 lakh under the 2024 tax regime. This adjustment would result in an additional 5% of income retained by the taxpayer, leading to a monthly saving of approximately Rs 9,500. According to Adhil Shetty, CEO of Bankbazaar, this change provides significant relief to taxpayers.

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"The most important change has been the revision of the tax slabs keeping in line with inflation. This has been a long-standing request of the taxpayers for the last so many years. In the updated tax reforms, with slabs adjusted for inflation, the 30% tax rate is now applicable above ₹24 lakh, up from the initial ₹15 lakh. This change in the 30% slab marks a 60% adjustment.  Under the proposed 2025 tax regime, someone earning ₹25 lakh annually will pay ₹3.43 lakh in total tax, compared to ₹4.57 lakh under the 2024 regime. This translates to 5% more money in hand and a monthly saving of around ₹9,500 — a substantial relief for taxpayers," Shetty added. 

He added: "The income tax reforms introduced in the budget are among the biggest in the last decade — simplified and rationalized to put more money in people's hands without compromising the fiscal deficit. This rationalisation of income tax has been long-awaited and will go a long way in reaffirming the confidence of the people in the economy. More cash in hand will also mean increased spending, which will drive higher consumption and, in turn, will fuel economic growth."

Revised New Tax Regime 2025

Under the new tax regime, individuals earning up to Rs 12 lakh annually will be exempt from paying income tax. Those with higher incomes, specifically those earning Rs 25 lakh, will receive a tax relief of Rs 1.1 lakh. The implementation of these exemptions is projected to result in a direct tax revenue loss of Rs 1 lakh crore and an indirect tax revenue loss of Rs 2,600 crore.

To claim the rebate, the taxpayers have to file Income Ta Returns. 

The Finance Minister said in Budget 2025 speech: "I am now happy to announce that there will be no Income Tax Payable up to income of 12 lakh rupees. I propose to revise tax rate structures as follows, zero to four lakh rupees nil, 4.8 lakh rupees to five four to eight lakh rupees, 5% eight to 12 lakh rupees, 10% 12 to 16 lakh rupees, 15% 16 to 20 lakh rupees, 20% 20 to 24 lakh rupees, 25% and above 24 lakh rupees, 30 lakh, 30% to taxpayers, to taxpayers up to 12 lakh of normal income, other than special grade incomes, such as capital gains."

The new tax slabs are categorized as follows:

Up to Rs 4 lakh: No tax
Rs 4 lakh – Rs 8 lakh: 5%
Rs 8 lakh – Rs 12 lakh: 12%
Rs 12 lakh – Rs 16 lakh: 15%
Rs 16 lakh – Rs 20 lakh: 20%
Rs 20 lakh – Rs 24 lakh: 25%
Above Rs 24 lakh: 30%