Introduction
The Indian government has introduced significant personal income tax reforms, focusing on middle-class taxpayers. With the Budget 2025, the new tax regime brings revised slabs, increased tax-free income limits, and enhanced benefits. Let’s explore these key changes and how they impact different income groups.
Key Features of the New Tax Regime
| Total Income (Rs.) | Tax Rate (Section 115BAC(1A)) |
|---|---|
| 0 – 4,00,000 | Nil |
| 4,00,001 – 8,00,000 | 5% |
| 8,00,001 – 12,00,000 | 10% |
| 12,00,001 – 16,00,000 | 15% |
| 16,00,001 – 20,00,000 | 20% |
| 20,00,001 – 24,00,000 | 25% |
| Above 24,00,000 | 30% |
1. Increased Tax-Free Income Limit
Under the proposed tax slabs, individuals earning up to ₹12 lakh can now enjoy a zero tax liability, subject to the rebate available in the new regime. This is a substantial increase from the previous limit of ₹7 lakh, benefiting approximately one crore taxpayers.
2. Standard Deduction and Taxpayer Benefits
- The standard deduction has been increased to ₹75,000, reducing taxable income for salaried individuals.
- This ensures that a salaried taxpayer with income up to ₹12,75,000 will not be required to pay tax after considering the deduction.
3. Marginal Relief for Taxpayers Above ₹12 Lakh
- To prevent tax burdens from rising steeply, a marginal relief mechanism has been introduced.
- For instance, an individual earning ₹12,10,000 would have a tax liability of ₹61,500 as per the slabs, but due to marginal relief, the actual tax payable is only ₹10,000.
4. Overall Tax Savings Across Different Income Levels
| Total Income (Rs.) | Tax as per Existing Rates (2024) | Tax as per Proposed Rates (2025) | Total Benefit (₹) |
| 8,00,000 | 30,000 | 20,000 | 10,000 |
| 10,00,000 | 50,000 | 40,000 | 10,000 |
| 12,00,000 | 80,000 | 60,000 | 20,000 |
| 15,00,000 | 1,40,000 | 1,05,000 | 35,000 |
| 20,00,000 | 2,90,000 | 2,00,000 | 90,000 |
5. How to Avail Benefits of NIL Tax Liability?
- The new tax regime is now the default option.
- Taxpayers only need to file their income tax return (ITR) to claim the benefits. No additional steps are required.
Who Benefits the Most?
- Middle-Class Earners: Individuals with an annual income of up to ₹24 lakh will see reduced tax burdens.
- Salaried Employees: With the higher standard deduction, net taxable income decreases, leading to additional savings.
- First-Time Taxpayers: Those entering the workforce benefit from a simple and lower tax structure.
Impact on the Economy
With these reforms, the government aims to:
- Boost disposable income, increasing consumer spending.
- Encourage tax compliance, making filing easier and more beneficial.
- Support economic growth, by leaving more money in the hands of the taxpayers.
Conclusion
The new tax regime under Budget 2025 marks a progressive step towards tax simplification and relief for middle-class taxpayers. By raising the zero-tax limit to ₹12 lakh, increasing standard deductions, and offering marginal relief, this structure makes taxation more efficient and beneficial for millions of Indians.
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