Finance Minister Nirmala Sitharaman said in the most anticipated news of this Union Budget 2025 that income tax will not apply for incomes less than ₹12 lakhs. She called it middle class commitment and trust. Under the new tax system, income of up to ₹12.75 would have no income tax burden, effectively underlining the old standard deduction of ₹75,000.
“I am now happy to announce that under the new regime, there will be no income tax payable up to income of ₹12 lakh [i.e. average income of ₹1 lakh per month other than special rate income such as capital gains],” the Finance Minister remarked.
The action follows popular agreement in the sector and among people generally on raising overall economic consumption. “The new tax structure will largely reduce the taxes of middle-class and leave more money in the hands of the middle class and boost consumption.”
The Finance Minister listed changes in tax slabs; incomes up to ₹4 lakhs would not be taxed; ₹4 to 8 lakhs would host 5% taxation rate; ₹12-16 lakh 10%; ₹12-16 lakh 15%; ₹16-20 lakh 20%; ₹20-24 lakh 25%; and incomes over ₹24 lakh 30%.
Ms. Sitharaman said a tax payer in the new regime with an income of ₹12 lakh would have a benefit of ₹80,000 in tax; a person having income of ₹18 lakh would get a benefit of ₹70,000; a someone with an income of ₹25 lakh would get a benefit of ₹1.10 lakh.
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