Union Budget 2025: No Tax for Income Up to ₹12 Lakh, Significant Benefits for Higher Earners

In a significant relief for middle-class taxpayers, Finance Minister Nirmala Sitharaman announced a tax rebate for individuals earning up to ₹12 lakh per year, ensuring that they will pay no income tax under the new tax regime. Additionally, she outlined substantial tax benefits for higher-income brackets, resulting in a revenue loss of ₹1 lakh crore in direct taxes and ₹2,600 crore in indirect taxes for the government.

Complete Tax Exemption for ₹12 Lakh Income

The Finance Minister stated that taxpayers earning up to ₹12 lakh (excluding special rate income such as capital gains) will not have to pay any tax due to a combination of slab rate reductions and an enhanced rebate. This move is aimed at providing financial relief and boosting disposable income, ultimately stimulating consumption and economic growth.

Tax Benefits for Higher Income Brackets

The revised tax structure also provides significant benefits to individuals earning ₹18 lakh and ₹25 lakh annually:

  • A taxpayer earning ₹18 lakh per year will save ₹70,000 in taxes, which amounts to 30% of the tax payable under the existing regime.
  • A taxpayer earning ₹25 lakh per year will receive a tax benefit of ₹1,10,000, equivalent to 25% of the tax payable under the current rates.

The minister emphasized that these measures will ease the tax burden on salaried individuals and boost compliance by making the tax regime more attractive.

Revenue Implications of Tax Cuts

While the tax relief brings benefits to individuals, it will also lead to a significant reduction in government revenue. According to Sitharaman, the new proposals will result in a revenue loss of ₹1 lakh crore in direct taxes and ₹2,600 crore in indirect taxes. However, she expressed confidence that higher economic activity and improved taxpayer compliance will help offset the revenue shortfall over time.

A Boost for Middle-Class and Economic Growth

The announcement has been widely welcomed, especially by salaried professionals and business owners who will see more disposable income in their hands. Economic analysts believe that this tax relief could boost spending, drive consumption, and support India’s economic growth in the coming fiscal year.

With these tax proposals, the government aims to strike a balance between providing relief to taxpayers and maintaining fiscal stability. The detailed provisions of the tax amendments are provided in the annexure of the Budget document.

Prateeksha Thakur

[Prateeksha Thakur] is a seasoned journalist known for [her] sharp analysis and clear communication. At Newsisland, [she] focus on political reporting, offering readers a nuanced understanding of complex issues.

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