Union Budget 2025 has brought a major tax relief for millions of taxpayers in India. Finance Minister Nirmala Sitharaman announced that individuals earning up to ₹ 12 lakh per annum will not have to pay any income tax under the revised New Tax Regime for AY 2025-26. This move aims to provide significant financial relief to the middle class and boost consumption and savings.
Revised Income Tax Slabs for AY 2025-26 (New Tax Regime)
The government has simplified the tax structure, reducing the burden on middle-income earners. Here are the latest tax slabs:
| Income Range (₹ in Lakh) | Tax Rate (%) |
|---|---|
| ₹ 0 – ₹ 4 lakh | Nil |
| ₹ 4 lakh – ₹ 8 lakh | 5% |
| ₹ 8 lakh – ₹ 12 lakh | 10% |
| ₹ 12 lakh – ₹ 16 lakh | 15% |
| ₹ 16 lakh – ₹ 20 lakh | 20% |
| ₹ 20 lakh – ₹ 24 lakh | 25% |
| Above ₹ 24 lakh | 30% |
Key Highlights:
- Zero tax on income up to ₹ 12 lakh (including deductions under various sections).
- Taxpayers earning up to ₹ 25 lakh to receive benefits of up to ₹ 1.1 lakh.
- Marginal relief for individuals slightly exceeding the ₹ 12 lakh limit.
- Higher-income groups taxed progressively up to 30%.
Understanding the New Tax Benefits
While the new tax regime offers simplified slabs, the tax exemption for those earning up to ₹ 12 lakh is conditional upon availing deductions under various sections:
- Section 80CCC: ₹ 1.5 lakh exemption for investments in specified pension funds.
- Home Loan Interest Deduction: ₹ 1.5 lakh exemption for interest paid on home loans.
Finance Minister Sitharaman clarified: “To taxpayers earning up to ₹ 12 lakh (excluding capital gains and special rate income), an additional rebate ensures that no tax is payable.”
Comparison with Previous Tax Regimes
New Tax Regime (AY 2024-25)
| Income Slabs (₹) | Tax Rate (%) |
| Up to 3,00,000 | 0% |
| 3,00,001 – 7,00,000 | 5% |
| 7,00,001 – 10,00,000 | 10% |
| 10,00,001 – 12,00,000 | 15% |
| 12,00,001 – 15,00,000 | 20% |
| Above 15,00,000 | 30% |
Old Tax Regime (AY 2024-25)
| Income Slabs (₹) | Tax Rate (%) |
|---|---|
| Up to 2,50,000 | 0% |
| 2,50,001 – 5,00,000 | 5% |
| 5,00,001 – 10,00,000 | 20% |
| Above 10,00,000 | 30% |
Under the old tax regime, deductions under Sections 80C, 80D, and 80TTA continue to be available, making it beneficial for individuals with significant investments and expenses.
Choosing Between the Old and New Tax Regimes
Since April 1, 2023, the New Tax Regime has been set as the default option, but individuals can still opt for the old regime. The key difference lies in the availability of deductions:
- New Tax Regime: Lower tax rates but fewer deductions.
- Old Tax Regime: Higher tax rates but multiple deductions (80C, 80D, HRA, etc.).
Surcharge Rates: Old vs New Tax Regime
New Tax Regime
| Income Range (₹) | Surcharge Rate (%) |
|---|---|
| Up to 50 lakh | Nil |
| 50 lakh – 1 crore | 10% |
| 1 crore – 2 crore | 15% |
| Above 2 crore | 25% |
Old Tax Regime
| Income Range (₹) | Surcharge Rate (%) |
|---|---|
| Up to 50 lakh | Nil |
| 50 lakh – 1 crore | 10% |
| 1 crore – 2 crore | 15% |
| 2 crore – 5 crore | 25% |
| Above 5 crore | 37% |
New Income Tax Slabs: How to check income tax reduction in 2 minutes?
How This Budget Helps the Middle Class
The government’s decision to increase the tax exemption limit to ₹ 12 lakh under the new regime is a huge win for salaried individuals. This move is expected to:
- Boost household savings by reducing tax liability.
- Increase disposable income for the middle class.
- Encourage investment and economic growth by reducing the tax burden.
Final Thoughts
The Union Budget 2025 has introduced one of the most significant tax reforms in recent years. With zero tax on income up to ₹ 12 lakh, a simplified tax structure, and benefits for those earning up to ₹ 25 lakh, the middle class stands to gain the most. However, taxpayers must carefully evaluate whether the new tax regime or the old tax regime suits them best before filing their returns.
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No concessions for senior citizens.
Are there any changes in presumptive taxation section 44ADA this budget?
No changes as per my knowledge