Finance Minister Nirmala Sitharaman has given great relief to the middle class and salary taxpayers in Union Budget 2025. An income tax will not have to be paid on the annual income of up to Rs 12 lakh in the new tax regimen. This change is a great news for the middle class, which will increase their disposable income.
Under this new tax structure, the limit will increase to Rs 12.75 lakh for salary individuals, including standard deduction of Rs 75,000. This step has been taken to reduce tax burden on the middle class and promote their savings.
Income Tax Budget 2025: Key Performs of New Tax Regime
To understand the changes made in the new tax regimen, let’s take a look at its main features:
| Description | Acquaintance |
| Tax Free Income Limit | 12 lakh rupees (12.75 lakh for salary) |
| Minimum tax slab | 5% on 4-8 lakh rupees |
| Maximum tax rate | 30% on income above Rs 24 lakh |
| Standard deduction | 75,000 rupees |
| Tax rebate | 7 lakh rupees under Section 87A |
| Date of implementation | From financial year 2025-26 |
| Old Tax Regimen Status | Now continues, but encourage new reshaym |
New Income Tax Slabs 2025-26
The Finance Minister has announced the following Income Tax Slabs under the new tax resume:
- 0-4 lakh rupees: No tax
- 4-8 lakh rupees: 5%
- 8-12 lakh rupees: 10%
- 12-16 lakh rupees: 15%
- 16-20 lakh rupees: 20%
- 20-24 lakh rupees: 25%
- Above 24 lakh rupees: 30%
These new slabs will provide considerable relief to the middle class. For example, a person with an annual income of Rs 16 lakh will now have to pay only Rs 1,20,000 tax, which is less than Rs 50,000.
New Tax Regime vs old tax regime: What is the difference?
Election between new and old tax regimen is an important decision for taxpayers. Let’s compare between the two:
New Tax Regime:
- Low tax rates and generous slabs
- Limited deductions (eg section 80jjaa, 80m, standard deduction)
- No tax on income up to Rs 12 lakh
Old Tax Regime:
- More deductions and discounts (eg HRA, LIC Premium, PPF, Medical Insurance)
- No tax on income up to Rs 2.5 lakh
- 5% tax from 2.5 lakh to 5 lakh rupees
Important Note: The government is encouraging new tax regimen and has been made a default option. Taxpayers have to select especially to choose the old regimen.
Which tax regime choose?
This decision depends on the personal financial situation. According to EY, there is a simple rule:
- If your gross income is more than Rs 24.75 lakhs, the new tax regimen will be beneficial only when your deduction and discounts are less than Rs 8 lakh (except standard deduction).
- This limit may vary for income less than Rs 24 lakh.
Budget 2025 impact on middle class
Changes made in new tax regimen are quite beneficial for the middle class:
- More disposable income: Due to no tax on income up to Rs 12 lakh, people will have more money to spend.
- Simplification: The new regim is less complex and makes tax calculations easier.
- Beneficial for young taxpayers: New regimen can be more beneficial for young professionals with low deductions.
- Promotion of the economy: More disposable income may increase consumption, which can speed up the economy.
Benefits and disadvantages of new tax regime
Benefits:
- Low tax rates
- Simple structure
- Low paperwork
- No tax on income up to Rs 12 lakh
Loss:
- Limited deductions
- Long -term savings incentive
- Old reserves may still be beneficial for some people
Income Tax Calculation: How much will be left in the new regimen?
Let’s see with some examples how much tax will be saved in the new tax resolution:
- Annual income of Rs 12 lakh:
- In the old regim: about Rs 1,17,000 tax
- In the new regimen: no tax
- Savings: Rs 1,17,000
- Annual income of Rs 15 lakh:
- In the old regim: about Rs 1,95,000 tax
- In the new regimen: Rs 45,000 tax
- Savings: Rs 1,50,000
- Annual income of 20 lakh rupees:
- In the old regimen: about Rs 3,64,000 tax
- In the new resume: Rs 1,95,000 tax
- Savings: Rs 1,69,000
Future of new tax regime
The government aims to abolish all tax exemptions in the long run and make new tax regimen as the main system. The reasons behind this are:
- Simplification: to make the tax system more simplified.
- Low Compliance burden: reduce burden on both taxpayers and tax authorities.
- Digitalization: Making the tax process more digital.
Will the old tax regime be finished?
So far, the government has not announced to abolish the old tax regimen. However, the new regimen is being encouraged:
- The new regimen is now a default option.
- There was no mention of the old regimen in the budget 2025.
- In August 2024, about 72% of taxpayers selected the new regimen.
Suggestions for taxpayers
- Analyze your financial situation: Calculate your tax in both the reshemes.
- Consider long -term savings: The new regimen have low deductions, so rethink your savings scheme.
- Seek professional advice: People with complex financial conditions should consult a tax advisor.
- Stay regular updates: Keep knowledge of changes in tax laws.
Rejuvenation
This article is only for informative purposes. Tax rules can change from time to time, so always seek latest information and professional advice before taking decisions. The schemes and rules declared by the government may change, so be sure to confirm from official sources before any financial decision.
