Budget 2025: No Income Tax Payable Up To Rs 12 Lakh Under New Tax Regime

The government has finally announced something big for the middle-class citizens of India. In her Budget Speech, Union Minister of Finance Nirmala Sitharaman announced that now taxpayers earning income up to Rs 12 lakh will not have to pay any taxes.

Noting that the middle class is the strength of the Indian economy, she said: “In recognition of their contribution, we have periodically reduced the tax burdens. I am now happy to announce that there will be no income tax up to an income of Rs 12 lakh.”

The new income tax slabs under the new tax regime will be as follows:

0- Rs 4 lakh: No Tax

Rs 4 -8 lakh: 5 per cent

Rs 8 to Rs 12 lakh: 10 per cent

Rs 12 - Rs 16 lakh: 15 per cent

Rs 16-20 lakh: 20 per cent

Rs 20-Rs 24 lakh: 25 per cent

Above Rs 24 lakh: 30 per cent

The government has rejigged the income tax slabs while also increasing the tax rebate available under Section 87A. With this update, a taxpayer earning net taxable income up to Rs 12 lakh will not be required to pay any tax.

Catch all the latest Budget 2025 updates Here

Experts Weigh-In

Experts have said that the move will give more purchasing power to the salaried.

“As per earlier tax rate under the new regime, taxpayers having income up to 7 lakh were paying nil taxes after taking rebate of Rs 25,000 under Section 87A of the Act. Now that the rebate has been increased resulting that taxpayers having income up to 12 lakh (excluding special rate income) will pay nil tax now and will be saving Rs 80,000,” says Parveen Kumar, partner – direct tax, Dewan P N Chopra & Co.

Says Sandeep Chilana, managing partner, CCLaw, “Raising the income tax exemption threshold to Rs 12 lakh is a deeply positive move, especially for the middle class. For many, it brings much-needed relief, considering the increasing living costs and pressures of inflation. By increasing disposable income, the government is not only simplifying the tax system but also fostering consumer confidence.”

“This change will impact a broad spectrum of individuals, particularly in urban areas, giving them more room to invest and spend. The overall restructuring of tax slabs, aimed at a more equitable distribution, is also an encouraging step towards creating a progressive tax environment,” Chilana adds.

Says, Deepashree, partner, global employer services, tax & regulatory services, BDO India, “The proposal to exempt income up to Rs 12 lakh (excluding capital gains) is a big boost to the middle-class taxpayers. This is in line with the recent measures to make the new tax regime a preferred tax regime. It would also create more disposable income for the taxpayers strengthening their expenditure power.”

She adds, “For salaried taxpayers, no change has been proposed for standard deduction limits under the old tax regime (Rs 50,000) and new tax regime (Rs 75,000).”