Budget 2025: No tax up to ₹12L, new slabs
In Budget 2025, the government announced a major tax relief, stating that no income tax will be payable on a normal annual income of up to Rs 12 lakh. This move aims to provide financial relief to middle-class taxpayers and boost disposable income. Additionally, revised tax slabs have been introduced to further ease the tax burden. The changes are expected to enhance consumer spending, encourage savings, and stimulate economic growth, making taxation more simplified and taxpayer-friendly for millions across the country.
Budget 2025: Major Tax Relief for Middle Class, Revised Tax Slabs Introduced
New Delhi: Budget 2025-26 Brings Significant Tax Relief
Finance Minister Nirmala Sitharaman, while presenting Budget 2025-26, provided a major relief to the middle class by revising tax slabs and reducing tax incidence. The government announced that annual income of up to Rs 12 lakh would be exempt from income tax under the new income tax regime. Additionally, for salaried taxpayers, this threshold will be Rs 12.75 lakh, factoring in the standard deduction.
A taxpayer in the new regime with an income of Rs 12 lakh will save Rs 80,000 in taxes. Similarly, a person earning Rs 18 lakh annually will benefit from a tax reduction of Rs 70,000. Those earning Rs 25 lakh per annum will see a relief of Rs 1.10 lakh.
New Tax Slabs in Budget 2025
A person with an income of Rs 25 lakh gets a benefit of Rs 1.10 lakh.
However, the Budget has not made any changes in tax slabs under the old income tax regime, which includes a host of tax exemptions and deductions.
The finance minister Nirmala Sitharaman also said that the government will introduce a new Income Tax Bill next week.
“Transformative tax reforms” promised
The finance minister unveiled “transformative” tax reforms that ranged from a simpler income tax law to a higher TCS threshold for remittances and income tax benefits for the middle class.
Sitharaman in the 2025-26 Budget promised to bring a simpler, less voluminous new law to replace six decades-old law governing income tax, saying it will have the spirit of “Nyay”
TCS, TDS and more
Sitharaman emphasized that the new structure would substantially reduce the tax burden on the middle class, leaving them with higher disposable income. This, in turn, is expected to boost household consumption, savings, and investment, thereby strengthening the economy.
The finance minister clarified that no changes were made to the old income tax regime, which continues to offer various exemptions and deductions.
New Income Tax Bill Coming Next Week
A significant announcement in Budget 2025 was the upcoming introduction of a new Income Tax Bill.
The new tax code aims to replace the six-decade-old existing tax laws, making them simpler, more efficient, and more taxpayer-friendly. It is designed to embody the spirit of “Nyay” (justice) while ensuring transparency and fairness in tax administration.
Major Tax Reforms in Budget 2025
In addition to the revised tax slabs and the new tax bill, Budget 2025 introduced a host of tax reforms:
- The government has extended the time limit for filing updated tax returns from two years to four years. This allows taxpayers who may have omitted or under-reported income to rectify their filings without facing severe penalties.
- Higher TCS threshold for remittances: The threshold for collecting Tax Collected at Source (TCS) on remittances under RBI’s Liberalized Remittance Scheme (LRS) has been raised from Rs 7 lakh to Rs 10 lakh. Additionally, TCS on education-related remittances, when funded through a loan from a financial institution, has been completely exempted.
Changes in TDS Rules
The Budget also brought changes to Tax Deducted at Source (TDS) regulations, benefiting senior citizens and those receiving rental income:
- TDS on interest for senior citizens: The exemption limit has been increased from Rs 50,000 to Rs 1 lakh. This will reduce the tax burden on retired individuals relying on interest income for their livelihood.
- TDS on rent payments: The exemption limit has been raised from Rs 2.40 lakh to Rs 6 lakh per year. This will significantly benefit small landlords and reduce compliance burdens on tenants.
- Simplification of tax procedures: Over 100 provisions are being decriminalized under the upcoming Jan Vishwas Bill 2.0, aiming to create a more taxpayer-friendly environment.
Impact of Budget 2025 on Taxpayers
The revised tax regime introduced in Budget 2025 is expected to have a far-reaching impact on taxpayers across different income brackets. By exempting incomes up to Rs 12 lakh and reducing tax rates for various brackets, the government aims to increase disposable income, drive consumer spending, and encourage investments.
The Finance Minister reiterated that these tax cuts are aligned with the government’s broader vision of economic growth and stability. With the introduction of the new Income Tax Code, the tax system is set to become more transparent, efficient, and aligned with modern economic realities.
Conclusion
Budget 2025 has laid out a comprehensive roadmap for tax reforms, focusing on reducing the financial burden on the middle class while simplifying tax compliance. From revised tax slabs to the upcoming Income Tax Bill and reforms in TDS/TCS policies, the government has taken decisive steps toward a more efficient and fair tax regime.
With these measures, the government hopes to achieve higher tax compliance, greater transparency, and a more business-friendly tax environment. The Finance Minister has promised that the forthcoming Income Tax Bill will be a game-changer, further cementing India’s path toward economic resilience and prosperity.