The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, has introduced significant reforms to the income tax structure under the new tax regime. These changes aim to provide relief to taxpayers, boost disposable income, and stimulate economic growth. In this blog, we’ll break down the revised income tax slabs, key highlights, and how these changes will impact taxpayers.
Revised Income Tax Slabs for FY 2025-26
The new tax regime has been restructured to offer lower tax rates and increased exemptions. Here’s a detailed look at the updated income tax slabs:
| Income Range (₹) | Tax Rate (%) |
|---|---|
| Up to ₹4,00,000 | 0% |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
The introduction of a 25% tax rate for incomes between ₹20,00,001 and ₹24,00,000 and a 30% rate for incomes above ₹24,00,000 marks a significant shift in the tax structure.
Key Highlights of the Union Budget 2025
1. Increased Basic Exemption Limit
The basic exemption limit has been raised from ₹3,00,000 to ₹4,00,000 under the new tax regime. This means taxpayers can now earn up to ₹4,00,000 without paying any income tax, providing immediate relief to all income groups.
2. Enhanced Tax Rebate under Section 87A
The government has increased the tax rebate under Section 87A, allowing individuals with a net taxable income of up to ₹12,00,000 to pay zero income tax. This move is designed to benefit middle-class taxpayers, increasing their disposable income and encouraging higher savings and consumption.
3. Standard Deduction for Salaried Individuals
A standard deduction of ₹75,000 is now available under the new tax regime. This deduction reduces taxable income, offering additional relief to salaried individuals and simplifying the tax calculation process.
Impact of the New Tax Reforms on Taxpayers
The revised income tax slabs and enhanced rebates are expected to result in significant tax savings for individuals across various income brackets. Here’s how taxpayers stand to benefit:
1. For Middle-Income Earners:
Taxpayers earning up to ₹12,00,000 can now avail of the enhanced Section 87A rebate, effectively paying no income tax. This is a major boost for middle-class families, allowing them to allocate more funds toward savings, investments, or discretionary spending.
2. For High-Income Earners:
Individuals with higher incomes will also benefit from the revised tax slabs. For example, a salaried individual with a net taxable income of ₹15,00,000 could save up to ₹1,14,400 in taxes compared to the previous fiscal year.
3. Increased Disposable Income:
By reducing tax liabilities, the government aims to increase disposable income for individuals. This, in turn, is expected to stimulate economic activity through higher consumer spending and investments.
Why These Changes Matter
The Union Budget 2025’s focus on restructuring income tax slabs and enhancing rebates is a strategic move to address the financial concerns of taxpayers. Here’s why these changes are significant:
1. Tax Relief for All:
The increased exemption limit and standard deduction ensure that all taxpayers, regardless of their income bracket, benefit from reduced tax burdens.
2. Boost to Middle-Class Savings:
The enhanced Section 87A rebate is a game-changer for middle-class taxpayers, enabling them to save more and invest in their future.
3. Economic Growth Stimulus:
By increasing disposable income, the government aims to encourage higher consumption, which can drive demand, boost production, and ultimately stimulate economic growth.
Conclusion
The Union Budget 2025 introduces progressive changes to the income tax structure, offering relief to taxpayers and fostering economic growth. With revised tax slabs, increased exemptions, and enhanced rebates, the new tax regime is designed to benefit individuals across all income groups.
Whether you’re a middle-income earner or a high-net-worth individual, these reforms are likely to result in substantial tax savings and increased disposable income. As taxpayers, it’s essential to understand these changes and plan your finances accordingly to make the most of the new tax regime.
Stay informed, plan wisely, and leverage the benefits of the Union Budget 2025 to secure your financial future!