New Delhi, February 1, 2025 – The Indian government has announced major tax relief for the middle class in the Union Budget 2025. Finance Minister Nirmala Sitharaman declared that individuals earning up to ₹12 lakh will not have to pay any income tax under the new tax regime. With the inclusion of standard deductions, this exemption extends to ₹12.75 lakh.
The announcement, made in Parliament, was met with loud cheers from Members of Parliament (MPs), especially from the ruling Bharatiya Janata Party (BJP), with Prime Minister Narendra Modi leading the applause.
New Income Tax Slabs for 2025
The Finance Minister also introduced revised tax slabs under the new regime:
- Income up to ₹4 lakh – No tax
- ₹4 lakh to ₹8 lakh – 5% tax
- ₹8 lakh to ₹12 lakh – 10% tax
- ₹12 lakh to ₹16 lakh – 15% tax
- ₹16 lakh to ₹20 lakh – 20% tax
- ₹20 lakh to ₹24 lakh – 25% tax
- Above ₹24 lakh – 30% tax
These new tax rates apply only to the new tax regime, which offers lower tax rates but does not allow most deductions and exemptions.
Benefits for Middle-Class Taxpayers
The government believes that these changes will reduce the tax burden on middle-class families, giving them more money to spend, save, and invest. Ms. Sitharaman said, “This will substantially reduce tax burden on the middle class and leave more money in their hands.”
She also explained that these measures will help boost household consumption, encourage savings, and increase investments in the economy.
What This Means for Taxpayers
- More Savings – Individuals earning up to ₹12 lakh will pay no tax, while those earning slightly more will still benefit from lower tax rates.
- Simpler Tax Structure – The new regime has fewer slabs and lower rates, making tax calculations easier.
- Encourages Growth – With extra disposable income, household spending is expected to rise, helping businesses grow.
Reactions to the Budget
The announcement has received mixed reactions. Many experts and middle-class taxpayers have welcomed the move, calling it a major relief for salaried employees and small business owners. However, some financial analysts believe that removing deductions like those for home loans and insurance might not be beneficial for everyone.
The opposition has criticized the budget, saying that it does not address issues like rising inflation and job creation.
The Budget 2025 introduces major tax relief for the middle class, ensuring that those earning up to ₹12 lakh pay no tax. The new tax slabs offer lower rates, making taxation easier and more attractive under the new regime. While these changes are expected to increase spending and economic growth, their long-term impact will depend on how taxpayers adapt to the new system.
