Budget 2025: Income up to Rs 12 lakh exempt from tax, check new slab rates here

During her Union Budget 2025 speech, Finance Minister Nirmala Sitharaman announced that individuals with an annual income up to Rs 12 lakh will be exempt from paying income tax, offering significant relief, particularly to the middle class. 

This exemption limit increases to Rs 12.75 lakh for salaried taxpayers, accounting for a standard deduction of Rs 75,000. She also emphasized that the new income tax regime will be simplified, with a special focus on benefiting the middle class. 

However, to claim this benefit, taxpayers must avail themselves of relief under various sections of the Income Tax Act, such as the Rs 1.5 lakh exemption under Section 80CCC or for paying interest on home loans.

Sitharaman said, "To taxpayers up to Rs 12 lakh of normal income (other than special rate income such as capital gains), tax rebate is being provided in addition to the benefit due to slab rate reduction in such a manner that there is no tax payable by them."

The Finance Minister’s announcement, a major relief for the middle class, was met with loud applause from the treasury benches, led by Prime Minister Narendra Modi. Sitharaman further announced changes to the income tax slabs and rates across the board to ensure a more progressive taxation system. 

She said, "Slabs and rates are being changed across the board to benefit all taxpayers. 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."

The tax slabs and rates are as follows:

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

Under the new tax slabs, income up to Rs 4 lakh will be tax-free, a hike from the previous Rs 3 lakh.

A taxpayer earning Rs 12 lakh annually will benefit from Rs 80,000 in tax savings, while someone earning Rs 18 lakh will benefit by Rs 70,000. A person earning Rs 25 lakh will see a tax benefit of Rs 1.10 lakh under the new slabs.

Sitharaman illustrated the tax benefits with examples, saying, "The total tax benefit of slab rate changes and rebate at different income levels can be illustrated with a few examples. A taxpayer in the new regime with an income of Rs 12 lakh will get a benefit of Rs 80,000 in tax, which is 100% of tax payable as per the existing rates. A person with an income of Rs 18 lakh will get a benefit of Rs 70,000 in tax, which is 30% of tax payable as per existing rates. A person with an income of Rs 25 lakh will get a benefit of Rs 1.10 lakh, which is 25% of tax payable as per existing rates."

As a result of these proposals, the government expects to forgo about Rs 1 lakh crore in direct taxes and Rs 2,600 crore in indirect taxes.

Following the announcement, the Lok Sabha was adjourned by Speaker Om Birla. The House will now reconvene on February 3 at 11 a.m.