Tax-Free Income Up to ₹12 Lakh in Union Budget 2025-26

resr 5paisa Research Team

Last Updated: 1st February 2025 - 01:40 pm

1 min read

Middle-Class Taxpayers to Benefit from New Income Tax Regime

In a landmark announcement during the Union Budget 2025, Finance Minister Nirmala Sitharaman declared that individuals earning up to ₹12 lakh annually will be exempt from income tax under the new tax regime. With the standard deduction included, this threshold extends to ₹12.75 lakh, providing significant relief to middle-class taxpayers.

The announcement, met with loud applause in Parliament, marks a major shift in the government’s approach to taxation, aiming to reduce financial strain on salaried individuals and promote savings and investments.

Revised Income Tax Slabs for 2025

The new income tax slabs under the revised framework are as follows:

  • ₹4 lakh to ₹8 lakh – 5%
  • ₹8 lakh to ₹12 lakh – 10%
  • ₹12 lakh to ₹16 lakh – 15%
  • ₹16 lakh to ₹20 lakh – 20%
  • ₹20 lakh to ₹25 lakh – 25%
  • Above ₹25 lakh – 30%

 

These revisions aim to simplify tax compliance while ensuring that individuals across various income groups benefit from lower taxation.

Boost to Disposable Income and Economic Growth

The government estimates that the new tax slabs will result in ₹1 lakh crore in direct tax savings and ₹2,600 crore in indirect tax relief. According to Sitharaman, this policy will leave more money in the hands of taxpayers, potentially driving higher household spending, investments, and overall economic growth.

The Finance Minister also confirmed that a new Direct Tax Code will be introduced soon, aimed at further streamlining taxation and enhancing ease of compliance for individuals.

With the Union Budget 2025 focusing on middle-class empowerment, this historic tax reform is expected to have a long-term positive impact on the economy, benefiting millions of taxpayers across the country.

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