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The Indian Union Budget 2025 has introduced sweeping changes to the income tax structure, particularly within the new tax regime. Finance Minister Nirmala Sitharaman announced substantial reductions in tax liabilities for individuals across various income brackets. The most significant change is the elimination of income tax for individuals earning up to ₹12 lakh annually (₹12.75 lakh for salaried individuals, accounting for standard deductions). This represents a considerable increase from previous thresholds and aims to provide significant relief to the middle class. The Budget speech emphasized the government's commitment to easing the tax burden on taxpayers, highlighting this increase as a reflection of trust in the middle class's ability to contribute to the economy.
The new tax slabs for FY 2025-26 under the new regime show a progressive rate structure. The tax rate is 0% for income up to ₹4 lakh, 5% for income between ₹4 lakh and ₹8 lakh, 10% for income between ₹8 lakh and ₹12 lakh, 15% for income between ₹12 lakh and ₹16 lakh, 20% for income between ₹16 lakh and ₹20 lakh, 25% for income between ₹20 lakh and ₹24 lakh, and 30% for income above ₹24 lakh. This is a notable shift from the previous year's structure, which had different thresholds and rates. The provided tables detail the tax savings for different income levels under the revised structure, showcasing the potential reductions compared to the previous tax regime. These savings are particularly substantial for those in higher income brackets, though even lower-income earners see some benefit from the adjusted rates.
The article highlights several examples of tax savings under the new regime. For instance, an individual earning ₹12 lakh will now pay zero income tax, a considerable benefit. Individuals earning ₹18 lakh and ₹25 lakh will see savings of ₹70,000 and ₹110,000 respectively. The changes aim to simplify the tax system and encourage more taxpayers to adopt the new tax regime. The provided calculations, sourced from EY, clearly illustrate the financial benefits for individuals at various income levels. The inclusion of surcharge and cess in the calculations provides a more comprehensive picture of the total tax liability under both the existing and the proposed tax regime. The significant reductions in tax payable are presented as a key achievement of the Budget, aimed at boosting economic activity and improving the financial well-being of a considerable segment of the Indian population.
The introduction of the new income tax bill in parliament signifies a formal commitment to implementing these changes. The government's rationale for the reforms centres around making the new tax regime more appealing and increasing its adoption rate among taxpayers. Experts like Surabhi Marwah, Tax Partner at EY India, highlight the substantial savings available under the new regime. For example, an individual with a taxable income of ₹27 lakh would save ₹114,400 in taxes under the proposed new regime. This significant potential for tax savings is expected to positively impact household budgets and encourage greater participation in the formal economy.
Comparing the new regime with the old regime reveals a clear advantage for many taxpayers under the proposed changes. The simplification of tax slabs and rates under the new regime is touted as a major benefit, reducing complexity and making tax filing less cumbersome. The increase in the nil tax threshold to ₹12 lakh is a significant policy shift that directly addresses concerns about income tax burdens on the middle class. While the article primarily focuses on the advantages of the new tax regime, it implicitly suggests that those in higher income brackets might find the new structure more beneficial than the old regime, depending on their specific deductions and tax profile. Further analysis would be required to accurately compare the systems in all possible scenarios.