Union Finance Minister Nirmala Sitharaman, in her Union Budget 2025-26 speech, unveiled significant tax relief for salaried individuals. One of the most notable announcements was that taxpayers earning up to Rs 12 lakh annually will not be required to pay income tax under the new tax regime.
Increase in Tax Rebate for Middle-Class Taxpayers
“Resident individuals with total income up to Rs 7,00,000 do not pay any tax due to rebate under the new tax regime. It is proposed to increase the rebate for the resident individual under the new regime so that they do not pay tax if their total income is up to Rs 12,00,000. Marginal relief as provided earlier under the new tax regime is also applicable for income marginally higher than Rs 12,00,000,” stated the budget document.
This decision is expected to offer substantial financial relief to the middle class, allowing for increased disposable income, which can potentially boost consumption, savings, and investment in the economy.
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Open in new tab In addition to the rebate, the government has also increased the standard deduction for salaried individuals to Rs 75,000. This means that individuals earning up to Rs 12.75 lakh per annum will not have to pay any income tax under the new regime.
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Revised Tax Slabs Under the New Regime
The new tax regime has been overhauled with the following revised slabs:
– Income up to Rs 4 lakh – Nil
– Income between Rs 4 lakh and Rs 8 lakh – 5%
– Income between Rs 8 lakh and Rs 12 lakh – 10%
– Income between Rs 12 lakh and Rs 16 lakh – 15%
– Income between Rs 16 lakh and Rs 20 lakh – 20%
– Income between Rs 20 lakh and Rs 24 lakh – 25%
– Income above Rs 24 lakh – 30%
Impact on Middle-Class Households
The government’s move to restructure the tax regime is expected to have a far-reaching impact on middle-class households. By increasing the rebate threshold and restructuring the tax slabs, the new regime aims to leave more disposable income in the hands of the taxpayers, thereby stimulating economic growth.
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As the new tax structure comes into effect, its impact on consumer demand, investment trends, and overall economic activity will be closely monitored. The government’s focus remains on making taxation simpler, reducing the burden on individuals, and promoting economic growth.
