The Union Budget 2025 has introduced sweeping reforms in personal income tax, particularly targeting the middle-class segment. Under the new tax regime, individuals earning up to ₹12 lakh annually will be exempt from paying income tax. For salaried taxpayers, the exemption limit extends to ₹12.75 lakh, thanks to a standard deduction of ₹75,000.
Revised Tax Slabs:
- 0-4 lakh: Nil
- 4-8 lakh: 5%
- 8-12 lakh: 10%
- 12-16 lakh: 15%
- 16-20 lakh: 20%
- 20-24 lakh: 25%
- Above 24 lakh: 30%
Key Highlights on Income Tax:
- Tax Rebate for Incomes up to ₹12 lakh:
Individuals earning up to ₹12 lakh will receive a tax rebate, ensuring no tax liability. This is a substantial increase from the previous limit of ₹7 lakh. - Examples of Tax Benefits:
- Income of ₹8 lakh:
Previously, tax liability was ₹30,000. Under the new regime, it is reduced to ₹20,000, and with the rebate, the final tax payable is zero. - Income of ₹12 lakh:
Earlier, taxpayers would owe ₹80,000. Now, they receive a rebate of ₹80,000, making their tax liability zero. - Income of ₹18 lakh:
Taxpayers will benefit from a ₹70,000 reduction in taxes, decreasing their liability from ₹2.4 lakh to ₹1.7 lakh. - Income of ₹25 lakh:
A reduction of ₹1.1 lakh in tax liability brings the amount down from ₹4.4 lakh to ₹3.3 lakh.
- Income of ₹8 lakh:
- Impact on Government Revenue:
The reforms will lead to a revenue loss of approximately ₹1 lakh crore in direct taxes and ₹2,600 crore in indirect taxes.
Additional Proposals:
- Doubling of Tax Deduction Limit for Senior Citizens:
The limit for tax deductions on interest for senior citizens has been doubled from ₹50,000 to ₹1 lakh. - Increase in TDS Limit on Rent:
The annual threshold for TDS on rent has been increased from ₹2.4 lakh to ₹6 lakh. - Revised Threshold for Remittances:
The threshold to collect tax at source on remittances under RBI’s Liberalized Remittance Scheme has been raised from ₹7 lakh to ₹10 lakh.
These reforms mark a significant step towards easing the tax burden on the middle class, promoting savings, investment, and boosting overall consumption. The revised slabs and rebates are expected to benefit a large segment of taxpayers while fostering economic growth.
