The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, introduces a New Income Tax Slabs and announce a new income tax bill that is simpler and easier to understand. It will be about half the size of the current law. The budget also aims to provide tax relief to the middle class by possibly changing tax rates, slabs, and offering other benefits.

In the Union Budget 2025 speech, Finance Minister Nirmala Sitharaman introduced a revised tax structure, making significant changes across all income levels. Under the updated tax regime, individuals earning up to ₹12 lakh are exempt from taxation, while salaried employees benefit from an additional standard deduction of ₹75,000, effectively raising their tax-free income threshold to ₹12.75 lakh.

New Income Tax Slabs (FY 2025-26)

• Up to ₹4 lakh – No tax (0%)
• ₹4 lakh to ₹8 lakh – 5%
• ₹8 lakh to ₹12 lakh – 10%
• ₹12 lakh to ₹16 lakh – 15%
• ₹16 lakh to ₹20 lakh – 20%
• ₹20 lakh to ₹24 lakh – 25%
• Above ₹24 lakh – 30%

Tax Savings Under the New Regime

The Finance Minister highlighted that individuals earning up to ₹12 lakh (excluding special rate income such as capital gains) will not have any tax liability due to the rebate and revised slab rates. The overall savings for different income levels are illustrated below:

• An individual earning ₹12 lakh will save ₹80,000, which is the full amount of tax they would have paid under the previous rates.
• A person earning ₹18 lakh will receive a tax benefit of ₹70,000, equivalent to 30% of the tax they would have otherwise paid.
• An individual with an income of ₹25 lakh will save ₹1,10,000, reflecting a 25% reduction in tax liability compared to the previous tax regime.

Focus on the New Tax System by New Income Tax Slabs

The government aims to make the new tax system more appealing and may gradually remove the old one. Several changes have been introduced, and the new system is now the default. It is becoming more popular, with 72% of taxpayers choosing it in FY 2023-24.

Expected Changes in the New Tax Bill

The Budget 2025 introduces a new income tax bill with key changes, mainly focusing on simplifying taxes for the middle class. The bill aims to be clear, reduce disputes, and provide tax certainty. The government is also following a “trust first, check later” approach.

Other Key Changes

• More Tax Deductions: Tax benefits for the National Pension Scheme (NPS) will now apply to NPS Vatsalya accounts.
• Insurance Sector Boost: Foreign investment in insurance is now allowed up to 100% (earlier 74%).
• Senior Citizen Benefits: The tax deduction limit for seniors is doubled from ₹50,000 to ₹1 lakh.
• TCS Relief: The TCS limit for remittances under the LRS is raised to ₹10 lakh, and education-related remittances are exempt from TCS.
• More Time for Tax Returns: The deadline for filing updated tax returns is extended from two years to four years.

Explore What is Marginal Tax Relief?

These reforms aim to ease the tax burden on middle and upper-middle-income groups, increasing disposable income and promoting economic growth.

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