Mumbai, February 1: A major relief to India's middle class, the Union Budget 2025-26 by Finance Minister Nirmala Sitharaman has a big overhaul for income tax slabs. For individuals earning up to INR 12 lakh a year, income tax will not be applicable in the new regime announced during the Budget 2025. This will help ease pressure on finances and increase disposable income.

Nirmala Sitharaman pointed out the importance of the middle class, “The middle class provide strengths to the economy. In recognition of their contribution, we have periodically reduced the tax burdens.” The new tax slabs are going to further ease the burden for salaried individuals and small business owners. Union Budget 2025 Highlights: From New Income Tax Bill to Infra Initiatives, Here Are Key Takeaways You Need To Know.

Budget 2025: Revised Tax Slabs

  • INR 0– INR 4 lakhs: NIL

  • INR 4– INR 8 lakhs: 5%

  • INR 8– INR 12 lakhs: 10%

  • INR 12- INR 16 lakhs: 15%

  • INR 16- INR 20 lakhs: 20%

  • INR 20- INR 24 lakhs: 25%

  • Above INR 24 lakhs: 30%

How To Calculate Income Tax As per Revised Tax Rates

Resident taxpayers with a net taxable income up to INR 12 lakh will not pay income tax. For salaried taxpayers who are availing of the standard deduction benefit up to INR 75,000 under the new tax regime, the tax-free threshold goes up to INR 12.75 lakh. This is a big increase over the existing INR 7 lakh income threshold under the new tax regime. The finance minister has increased tax rebates rather than basic exemptions. Therefore, if your annual income surpasses INR 12.75 lakh, taxes are calculated according to the new slabs of the new assessment year.

The Budget Memorandum states that under Section 115BAC(1A), the rebate threshold under Section 87A is increased to INR 12,00,000 from INR 7,00,000 in the case of an individual taxpayer. Further, clause (a) of the first proviso to Section 87A is raised to INR 60,000 from INR 25,000. How New Income Tax Slabs and Rates, Announced in Budget 2025, Are Different From Current Income Tax Slabs and Rates Under Old and New Regimes.

A taxpayer who earns INR 12 lakh will save INR 80,000, while having an income of INR 18 lakh will have a tax savings of INR 70,000. Gross revenue earners over INR 25 lakh will save INR 1.1 lakh in taxes.

This rebalancing of tax slabs seeks to ease the burden on middle-income earners while keeping higher taxes for the more affluent brackets. The change is reflective of the government's realisation of the critical role the middle class plays in driving India's economic growth.

(The above story first appeared on LatestLY on Feb 01, 2025 02:36 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).