Responding to middle-class resentment against the ruling party, Finance Minister Nirmala Sitharaman, presenting her record eighth consecutive Budget, has declared a significant rebate on income tax. Those earning up to Rs 12 lakh will have zero income tax liability under the new regime.
“The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment,” she said in her Budget speech.
The move should provide relief to nearly 85% of the 7.5 crore return filers. The Finance Minister announced that the tax rebate offered under Section 87A would be raised. The old tax regime remains intact. The time to file tax returns is also extended from two years to four years.
The taxpayer will be subject to taxes at the new slab rates if the taxable income exceeds Rs 12 lakh by even a single rupee.
A taxpayer in the new regime with an income of Rs 12 lakh will get a benefit of Rs 80,000 in tax. Those with an income of Rs 18 lakh will get a benefit of Rs 70,000 in tax. A person with an income of Rs 25 lakh gets Rs 1.10 lakh as benefit.
The new income tax slabs
Rs 0-4 lakh: Nil
Rs 4-8 lakh: 5%
Rs 8-12 lakh: 10%
Rs 12-16 lakh: 15%
Rs 16-20 lakh: 20%
Rs 20-24 lakh: 25%
Above Rs 24 lakh: 30%
The Finance Minister announced that the government would forgo Rs 2,600 crore in indirect tax revenue and Rs 1 lakh crore in direct tax revenue due to the expanded tax exemption.
The Budget also highlights growth and aims to enhance the spending power of key segments of society, including the middle class, farmers, women, and youth.
Sitharaman outlined reforms in six core areas: taxation, power, urban development, mining, the financial sector, and regulatory policies. She echoed Prime Minister Narendra Modi’s sentiment, emphasising the Budget’s inclusive approach to unlocking India’s vast potential.
“This is a Budget for the common man. The focus is on uplifting the poor, youth, farmers, and women,” Sitharaman stated. “Our economy is the fastest growing among major economies, and the confidence in India’s future only continues to rise.”
With these ambitious reforms and tax relief measures, the government is setting the stage to accelerate growth, stimulate domestic consumption, and strengthen India’s economic future.
Thumbs up from the PM
Meanwhile, PM Modi commended the Finance Minister in the Parliament after the Budget presentation, stating, “Everybody is praising you; the Budget is very good,” acknowledging the significance of the measures outlined in the Budget.
“This is the budget of ‘GYAN’ (garib, yuva, annadaata, rani),” he said while addressing a Cabinet meeting.
Income tax exemption limits through the years:
2005: Rs 1 lakh
2012: Rs 2 lakh
2014: Rs 2.5 lakh
2019: Rs 5 lakh
2023: Rs 7 lakh
2025: Rs 12 lakh
Other Highlights
India’s FM announced the launch of the Nuclear Energy Mission to develop at least 100GW of nuclear energy by 2047.
The significant hike in foreign direct investment (FDI) in the insurance sector from 74% to 100% should attract global insurance giants and increase capital inflows.
An Export Support Mission to provide quick access to export credit and cross-border factoring support, as well as help MSMEs tackle non-tariff measures in overseas markets.
The government is to launch a scheme offering term loans of up to Rs 2 crore to first-time entrepreneurs among women, scheduled castes, and scheduled tribes.
Infusion of Rs 20,000 crore to increase tourism-led employment.
The loan limit under the Modified Interest Subvention Scheme (MISS) is to increase from Rs 3 lakh to Rs 5 lakh.
10,000 medical undergraduate and postgraduate seats will be added over the next year.
PM-SVANidhi loan scheme to have enhanced bank loans, UPI-linked credit cards and capacity-building support. Now, vendors can avail of loans of Rs 10,000, Rs 20,000 and Rs 50,000.
Government to set up another centre of excellence for AI, with an outlay of Rs 500 crore.
Also Read: Union Budget 2025: Sitharaman Raises Income Tax Rebate Limit to Rs 12 Lakh, Revises Tax Slabs
