Budget 2025: New Income Tax Slabs, No Tax Up to ₹12 Lakh

Aakhir Tak – In Shorts

1. Finance Minister Nirmala Sitharaman announced no income tax for individuals earning up to ₹12 lakh annually in Budget 2025.
2. The new income tax slabs include no tax up to ₹4 lakh, 5% on ₹4-8 lakh, 10% on ₹8-12 lakh, and higher taxes for higher incomes.
3. This significant change aims to provide major relief to the middle class and boost economic growth through increased disposable income.
4. The income tax exemption hike is the largest in two decades, benefiting around 85% of taxpayers.
5. The government is expected to forgo over ₹1 lakh crore in direct tax revenue and ₹2,600 crore in indirect taxes.

Aakhir Tak – In Depth

Historic Change in Income Tax Slabs
In a major overhaul in Budget 2025, Finance Minister Nirmala Sitharaman announced significant changes to the income tax slabs. The exemption limit has been raised to ₹12 lakh, up from ₹7 lakh, marking one of the largest tax relief packages in recent years. This decision is aimed at providing middle-class taxpayers with substantial financial relief. The new tax structure is expected to benefit salaried individuals and small business owners, who have been facing increased financial pressures in recent years.

Details of the New Income Tax Slabs
The revised income tax slabs are as follows: no tax for income up to ₹4 lakh, 5% tax on ₹4-8 lakh, 10% on ₹8-12 lakh, 15% on ₹12-16 lakh, 20% on ₹16-20 lakh, 25% on ₹20-24 lakh, and 30% on income above ₹24 lakh. This change is expected to ease the financial burden on the salaried class and increase disposable income. The aim is to boost spending and stimulate economic growth, especially amid economic slowdowns.

Economic Strategy Behind the Move
The government views this as a strategic move to stimulate consumption and boost the economy. With more disposable income, consumers are expected to increase spending, thereby driving demand and production. Economic experts believe this move will also aid in addressing the country’s growth slowdown, projected to be at a four-year low of 6.4% in 2024-25, according to the Economic Survey.

Largest Tax Rebate in Two Decades
The announcement of a ₹12 lakh income tax exemption is the largest increase in tax exemption in over 20 years. The move is expected to positively impact about 85% of taxpayers, making it a significant step towards easing the tax burden on the middle class. This change also reflects the government’s intent to address public discontent and gain favor ahead of upcoming elections.

Government’s Economic Outlook
With a projected loss of over ₹1 lakh crore in direct taxes and ₹2,600 crore in indirect taxes, the government is hoping this will encourage increased spending among the Indian populace. The decision is part of a broader strategy to reinvigorate the economy, especially in light of the current economic slowdown. This move also indicates the government’s commitment to supporting the middle class and small businesses during these challenging times.

Aakhir Tak – Key Takeaways to Remember

1. Budget 2025 raises the income tax exemption limit to ₹12 lakh.
2. The new tax slabs include no tax up to ₹4 lakh and increasing rates for higher incomes.
3. This move benefits 85% of income taxpayers, particularly those in the middle class.
4. The ₹12 lakh exemption is the largest increase in two decades.
5. The government’s economic strategy aims to boost consumer spending and drive growth.

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