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NO income tax till ₹12 lakh: A look at the new tax slabs vs. current tax slabs
Income Tax 2025: The 2025-26 Union Budget, presented by Finance Minister Nirmala Sitharaman, focuses on relieving the middle class with a new tax regime. Key features include no tax on income up to Rs. 12 lakh and lower rates across income brackets, enhancing disposable income.
Union Finance Minister Nirmala Sitharaman delivered her eight consecutive Union Budget at 11 am on Saturday, February 1, 2025. The Budget aims to provide significant benefits to taxpayers, particularly the middle class, by reducing the tax burden and leaving more disposable income in their hands.
Major changes in the income tax slabs for FY 2025-26
The Union Budget 2025-26 introduced a revamped income tax structure designed to reduce taxes for the middle class. The new tax regime will provide substantial relief, making it more attractive for taxpayers.
Key announcements on income tax rates
No tax on income up to Rs. 12 lakh: The most significant update is that there will be no income tax payable on annual earnings of up to Rs. 12,00,000 under the new tax regime.
Revised income tax slabs under the new tax regime
| New tax slab | New tax rates | Old tax slab | Old tax rate |
|---|---|---|---|
| 0-4 lakh | Nil | 0-3 lakh rupees | Nil |
| 4-8 lakh | 5 per cent | 3-7 lakh rupees | 5 per cent |
| 8-12 lakh | 10 per cent | 7-10 lakh rupees | 10 per cent |
| 12-16 lakh | 15 per cent | 10-12 lakh rupees | 15 per cent |
| 16-20 lakh | 20 per cent | 12-15 lakh rupees | 20 per cent |
| 20- 24 lakh | 25 per cent | Above 15 lakh rupees | 30 per cent |
| Above 24 lakh | 30 per cent | - | - |
Income tax slabs under the old tax regime
While the new tax regime is being widely promoted, taxpayers can still opt for the old tax regime, which offers different slab rates:
Income up to Rs. 2,50,000: No tax
Rs. 2,50,001 to Rs. 5,00,000: 5% tax
Rs. 5,00,001 to Rs. 10,00,000: 20% tax
Above Rs. 10,00,000: 30% tax
New tax regime vs. old tax regime
The new tax regime offers substantial benefits for middle-income earners by lowering the income threshold for tax payments. The introduction of higher exemptions in the new structure has been designed to stimulate household consumption, savings, and investments.
Old Tax Regime: Offers greater flexibility with exemptions and deductions (e.g., HRA, LTA, etc.), but the tax rates are comparatively higher.
New Tax Regime: Offers lower tax rates but with fewer exemptions and deductions, making it easier for taxpayers to file taxes and plan finances with less complexity.
Potential changes in deductions and rebate under both regimes
Taxpayers were also hopeful of increased standard deduction limits and rebate adjustments under both regimes:
Standard deduction limit: Currently, the old tax regime offers a standard deduction of Rs. 50,000, while the new tax regime offers Rs. 75,000. There are expectations of a possible hike in these limits to provide more relief to taxpayers.
Section 87A rebate: In the new tax regime, the Section 87A rebate provides up to Rs. 25,000 for individuals earning up to Rs. 7,00,000 annually. In contrast, the old tax regime offers a rebate of Rs. 12,500 for annual incomes up to Rs. 5,00,000. It’s expected that the government may increase the rebate to further aid middle-class taxpayers.
Union Budget 2025-26: A catalyst for the middle class
Finance Minister Nirmala Sitharaman emphasized that the new tax structure was introduced with the middle class in mind. The budget is designed to reduce the financial burden, thereby increasing disposable income and boosting overall economic activity, especially household consumption.
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Business NewsBudgetNO income tax till ₹12 lakh: A look at the new tax slabs vs. current tax slabs
First Published:1 Feb 2025, 12:17 PM IST
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