In the Union Budget 2025, Finance Minister Nirmala Sitharaman announced significant tax relief for middle-income taxpayers, stating that one crore people will be exempt from paying taxes.
Speaking at a post-Budget press conference, she confirmed, "One crore people will pay no tax," responding to a query about the number of taxpayers who would benefit from the new tax proposals.
She also mentioned that the income tax simplification, which she had detailed in the July 2024 Budget, had already been completed, and the bill for this would be presented in Parliament next week.
As part of the new tax changes, Sitharaman revealed that individuals earning up to Rs 12 lakh annually will no longer have to pay income tax, significantly raising the exemption limit from Rs 7 lakh in the previous year.
For salaried taxpayers, the exemption limit will be Rs 12.75 lakh, which includes a standard deduction of Rs 75,000.
Finance Secretary Tuhin Kanta Pandey explained, "Now it being raised to Rs 12 lakh," highlighting the benefits to middle-income taxpayers. The income tax exemption has seen a steady increase over the years, with the limit rising from Rs 2.2 lakh in 2014 to Rs 5 lakh in 2019, and Rs 7 lakh in the recent past.
These changes are expected to result in the government forgoing about Rs 1 lakh crore in direct taxes and Rs 2,600 crore in indirect taxes.
However, the government anticipates that the saved money will be reinvested back into the economy through consumption, savings, or investments.
In addition, the Finance Minister reiterated that the government is working on a comprehensive review of the Income-tax Act, 1961, with the goal of making it more concise, lucid, and reducing disputes and litigation.