Finance Minister Nirmala Sitharaman presented her 8th union budget 25-26 in the parliament on 1st February 2025. At the beginning of her speech, she expressed her aims - “a) accelerate growth b) secure inclusive development c) invigorate private sector Investments d) uplift household sentiments and e) enhance spending power of India's Rising middle class.”
“The ability of the middle class in nation-building in recognition of their contribution, we have periodically reduced their tax burden. Right after 2014, the nil tax slab was raised to ₹2.5 lakhs, which was further increased to ₹5 lakhs in 2019 and ₹7 lakhs in 2023,” said FM Nirmala Sitharaman.
Income up to ₹12 lakhs, which is equivalent to ₹1 lakh per month, will be exempted from tax, excluding special rate incomes like capital gains. For salaried taxpayers under the new regime, the exemption threshold rises to ₹12.75 lakhs, including a standard deduction of ₹75,000.
“The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings, and investment in the new tax regime," said FM Sitharaman.
Finance Minister Sitharaman proclaimed that the new tax slabs and rates are being revised to benefit all taxpayers. The updated structure is expected to significantly lower the tax burden for the middle class. In the new tax regime, the proposed revised tax rate structure is as follows:
₹0 to ₹4 lakhs: Nil
₹4 to ₹8 lakhs: 5%
₹8 to ₹12 lakhs: 10%
₹12 to ₹16 lakhs: 15%
₹16 to ₹20 lakhs: 20%
₹20 to ₹24 lakhs: 25%
Above ₹24 lakhs: 30%
There will be no tax liability for taxpayers earning up to ₹12 lakhs, excluding special rate incomes like capital gains, whereas a tax rebate is being provided in addition to slab rate reductions. The total tax benefit is described as follows:
A taxpayer with ₹12 lakh income will have benefits of ₹80,000, reducing the tax payable by 100% under existing rates.
A taxpayer earning ₹18 lakhs will benefit by ₹70,000, which is a 30% reduction from current tax rates.
A taxpayer with ₹25 lakh income will receive a benefit of ₹1,10,000, or 25% of the tax payable under current rates.
Consequently, the government will forgo approximately ₹1 lakh crore in direct taxes and ₹2,600 crore in indirect taxes.
Taxpayers are expecting an increase in the standard deduction limit across both old and new tax regimes. Presently, the old regime provides a standard deduction of ₹50,000, while the new regime allows up to ₹75,000. However, there is a growing demand for additional exemptions and deductions within the new tax regime.
