Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2025-26 on February 1, announced a major relief for taxpayers. Under the new tax regime, individuals with an annual income of up to ₹12 lakh will no longer be required to pay income tax. For salaried taxpayers, this exemption rises to ₹12.75 lakh, thanks to a basic deduction of ₹75,000.
The government has introduced revised tax slabs designed to ease the financial burden on the middle class. This initiative aims to increase disposable income, which in turn is expected to boost household consumption, savings, and investments. During her speech in the Lok Sabha, FM Sitharaman described the restructured tax framework as a transformative step for economic growth.
“The new tax regime will significantly reduce the tax burden on the middle class, enabling them to save more and spend more, thereby driving overall economic activity,” she stated.
Finance Secretary Tuhin Kanta Pandey shared projections of a tax buoyancy rate of 1.42 for the upcoming fiscal year, a decrease from the 2.0 rate recorded in FY25. Pandey also highlighted that approximately 75% of taxpayers have already transitioned to the new tax regime, and it is anticipated that more will follow in the coming years.
New Income Tax Slabs for 2025-26:
- ₹0-4 lakh: Nil
- ₹4-8 lakh: 5%
- ₹8-12 lakh: 10%
- ₹12-16 lakh: 15%
- ₹16-20 lakh: 20%
- ₹20-24 lakh: 25%
- Above ₹24 lakh: 30%
The updated tax structure exempts those earning up to ₹12 lakh annually from any tax liability. For incomes above ₹12 lakh, progressive rates apply, starting from nil for income up to ₹4 lakh, and scaling up to 30% for earnings above ₹24 lakh.
This budget is seen as a game-changer for the middle class, providing substantial tax relief and setting the stage for enhanced economic growth through increased consumption and investment.