The Modi government has given relief to taxpayers by making significant changes to income tax rules. Finance Minister Nirmala Sitharaman announced in Budget 2025 that salaried individuals and the middle class will get benefit as the government has increased the zero-tax limit from Rs 3 lakh to Rs 4 lakh, and income up to Rs 12 lakh is now completely tax-free. This decision will lead to substantial savings for millions of taxpayers.
In addition, all tax slabs have been revised, ensuring that individuals earning up to Rs 24 lakh will also save up to Rs 1.10 lakh. Despite a revenue impact of Rs 1 lakh crore, the government has taken this bold step to provide relief to the common people. However, these changes apply only to the new tax regime, while the old tax structure remains unchanged.
New Income Tax Slabs
The government has revised tax slabs under the new regime to offer greater relief:
• Up to Rs 4 lakh income – Zero tax
• Rs 4 lakh to Rs 8 lakh – 5% tax
• Rs 8 lakh to Rs 12 lakh – 10% tax
• Rs 12 lakh to Rs 16 lakh – 15% tax
• Rs 16 lakh to Rs 20 lakh – 20% tax
• Rs 20 lakh to Rs 24 lakh – 25% tax
• Above Rs 24 lakh – 30% tax
How much will you save?
With these changes, taxpayers from all income brackets will benefit. The estimated savings are as follows:
• Individuals earning up to Rs 12 lakh will save Rs 80,000.
• Those earning between Rs 12 lakh and Rs 18 lakh will save Rs 70,000, reflecting a 33% tax reduction.
• Individuals earning up to Rs 25 lakh will get a Rs 1.10 lakh tax benefit, which is 25% higher than the previous system.
Along with making income up to Rs 12 lakh tax-free, the government has retained the Rs 75,000 standard deduction. This means individuals earning up to Rs 12.75 lakh will pay zero tax. For income beyond this, tax will be applicable as per the revised slabs, which have lower rates compared to the earlier system.
This initiative aims to provide relief to the middle class and boost consumption. While the decision will impact government revenue by approximately Rs 1 lakh crore, the government anticipates economic growth through increased tax compliance and higher spending.