Union Budget 2025: Zero Income Tax for Annual Income Up to ₹12 Lakh

Union Budget 2025: Income Tax Slabs Revised; Zero Tax for Incomes Up to ₹12 Lakh

In a groundbreaking move during the Union Budget 2025, Finance Minister Nirmala Sitharaman revealed that individuals earning up to ₹12 lakh annually will no longer be subject to income tax under the revised tax regime. This announcement was made in her speech in the Lok Sabha, marking a significant shift in tax policies aimed at easing the financial burden on the middle class.

The new tax structure will overhaul the existing income tax slabs, providing substantial relief to taxpayers across various income brackets. Sitharaman emphasized that the changes are designed to benefit taxpayers by reducing their tax liabilities, ultimately putting more money in their hands to encourage household consumption, savings, and investment.

The new tax regime will ensure a more equitable distribution of tax obligations while fostering economic growth. The finance minister also mentioned that a new Income Tax (I-T) Bill will be introduced in Parliament next week, detailing further reforms to improve the tax system.

Currently, taxpayers have the option to choose between two tax regimes. The first is the traditional tax system, offering exemptions for housing rentals and insurance, while the second is the newer tax structure introduced in 2020. The latter provides slightly lower rates but removes most exemptions. Salaried taxpayers can opt for either system when filing their returns. However, for those with income derived from business or profession, the new tax regime will be the default starting from FY 2023-24.

Here are the updated tax slabs under the new regime:

• ₹0 to ₹4 lakh: Nil
• ₹4 to ₹8 lakh: 5%
• ₹8 to ₹12 lakh: 10%
• ₹12 to ₹16 lakh: 15%
• ₹16 to ₹20 lakh: 20%
• ₹20 to ₹24 lakh: 25%
• Above ₹24 lakh: 30%

These changes are expected to benefit a significant portion of the population, making the tax system simpler and more transparent. The government’s push for tax reforms aims to boost economic activity while also alleviating the financial stress on individuals, particularly those in the middle-income group.

As the details of the new Income Tax Bill emerge next week, the public can look forward to further clarifications on the implementation of these changes. This initiative is a step forward in making the tax process more efficient and taxpayer-friendly, helping individuals better plan their finances.

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