In a significant relief for the middle class, Union Finance Minister Nirmala Sitharaman on Saturday announced that under the new tax regime, no income tax will be payable on earnings up to Rs 12 lakh. Including standard deductions, this threshold effectively rises to Rs 12.75 lakh. The announcement was made while presenting the Union Budget 2025-26 in Parliament.
Additionally, Sitharaman introduced revised income tax slabs under the new regime. Income between Rs 8 lakh and Rs 12 lakh will be taxed at 10 per cent, between Rs 12 lakh and Rs 16 lakh at 15 per cent, between Rs 16 lakh and Rs 20 lakh at 20 per cent, between Rs 20 lakh and Rs 25 lakh at 25 per cent, and above Rs 25 lakh at 30 per cent.
Senior citizens will also benefit from higher tax deductions. The deduction limit on interest income has been doubled from Rs 50,000 to Rs 1 lakh.
The finance minister emphasised that these changes would substantially reduce the tax burden on the middle class. She also underscored the government’s commitment to tax reforms aimed at easing compliance, rationalizing TDS, and enhancing financial transparency.
Zero Income Tax till ₹12 Lakh Income under New Tax Regime
Slabs and rates being changed across the board to benefit all tax-payers
— Ministry of Finance (@FinMinIndia) February 1, 2025
As part of these efforts, the government plans to introduce a new Income Tax Bill in Parliament next week. Sitharaman stated that the new bill would be more concise, half the length of the existing one, and written in clearer, more direct language. She said that reforms are not destinations but means to achieve good governance for the people and the economy.
Other key announcements included an increase in the TCS limit on remittances under RBI’s Liberalised Remittance Scheme from Rs 7 lakh to Rs 10 lakh. Additionally, 35 goods related to EV battery production and 28 goods for mobile phone battery manufacturing will be added to the list of exempted capital goods.
Also Read: Nirmala Sitharaman creates history with 8th consecutive budget
The Budget 2025-26 reflects the government’s focus on tax simplification and economic growth, promising significant benefits for taxpayers and key industries alike.
