No Income Tax For Those Earning Up To Rs 12 Lakh: FM Nirmala Sitharaman’s Mega Budget Relief

Last Updated:February 01, 2025, 14:18 IST

Budget 2025: The income tax exemption limit in 2005 was Rs 1 lakh, which was brought up to Rs 2 lakh in 2012. In 2014, the exemption limit was raised to Rs 2.5 lakh, to Rs 5 lakh in 2019, to Rs 7 lakh in…Read More

In major relief for the middle class, finance minister Nirmala Sitharaman in the Budget 2025 announced on Saturday said those earning up to Rs 12 lakh will not have pay income tax, even as the slabs below the income bracket remain.

Also, those earning up to Rs 13 lakh will effectively now be able save income tax as over and above the Rs 12 lakh income limit, there is a standard deduction of Rs 75,000, and a marginal relief of around Rs 30,000.

The tax slabs in the new regime will be as follows:

• Zero to Rs 4,00,000: No Tax
• Rs 4,00,000 to Rs 8,00,000: 5%
• Rs 8,00,0001 to Rs 12,00,000: 10%
• Rs 12,00,001 to Rs 16 lakh: 15%
• Rs 16,00,001 to Rs 20 lakh : 20%
• Rs 20,00,001 to Rs 24 lakh: 25%
• Above Rs 24 lakh: 30%

To tax payers up to Rs 12 lakh of normal income (other than special rate income such as capital gains), tax rebate is being provided in addition to the benefit due to slab rate reduction in such a manner that there is no tax payable by them.

A tax payer in the new regime with an income of Rs 12 lakh will get a benefit of Rs 80,000 in tax (which is 100% of tax payable as per existing rates). A person having income of Rs 18 lakh will get a benefit of Rs 70,000 in tax (30% of tax payable as per existing rates).

Those with an income of Rs 25 lakh will get a benefit of Rs 1.1 lakh (25% of his tax payable as per existing rates).

Tax exemption will result in Rs 1 lakh crore in direct taxes and Rs 2,600 crore of indirect tax to be foregone.

The income tax exemption limit in 2005 was Rs 1 lakh, which was brought up to Rs 2 lakh in 2012. In 2014, the exemption limit was raised to Rs 2.5 lakh, to Rs 5 lakh in 2019, to Rs 7 lakh in 2023 and now to Rs 12 lakh in 2025.

OTHER DIRECT TAX PROPOSALS

• EASE OF DOING BUSINESS: In addition to the personal tax reforms with focus on middle class, the government has announced introduction of a scheme to determine arm’s length price of international transaction for a block period of three years. The FM also announced expansion of scope of safe harbour rules to reduce litigation and provide certainty in international taxation.
• RATIONALISATION OF TDS/TCS: Tax deduction limit for senior citizens doubled from Rs 50,000 to Rs 1 lakh. The annual limit of Rs 2.40 lakh for TDS on rent increased to Rs 6 lakh.
• VOLUNTARY COMPLIANCE: Extension of time-limit to file updated returns, from the current limit of two years, to four years.
• REDUCING COMPLIANCE BURDEN: Reduced compliance for small charitable trusts/institutions by increasing their period of registration from 5 years to 10 years. Tax payers to be allowed to claim the annual value of two self-occupied properties (previously one) without any conditions (previously conditions attached).
• EMPLOYMENT AND INVESTMENT: Tax certainty for electronics manufacturing schemes. Tonnage tax scheme for inland vessels. Extension for incorporation by five years of start-ups. Specific benefits to ship-leasing units, insurance offices and treasury centres of global companies which are set up in IFSC. Certainty of taxation to Category I and category II AIFs, undertaking investments in infrastructure and other such sectors, on the gains from securities

EIGHTH CONSECUTIVE BUDGET

Sitharaman on Saturday made history as she presented a record eighth consecutive budget, which comes in the backdrop of slowdown in economy and demand for tax cuts for middle class. This will take Sitharaman closer to the record of 10 budgets that were presented by former Prime Minister Morarji Desai over different time periods. Desai has presented a total of six budgets during his tenure as finance minister from 1959 to 1964, and four budgets between 1967 and 1969.

Sitharaman on Saturday called on President Droupadi Murmu before presenting the Budget in the Lok Sabha. As per established tradition, the finance minister met the President at the Rashtrapati Bhavan before heading to Parliament.

President Murmu offered ‘dahi-chini’ (curd-sugar), considered auspicious, to Sitharaman before she left for Parliament to present the Union Budget.

“Union Minister for Finance and Corporate Affairs Smt Nirmala Sitharaman along with Minister of State for Finance Shri Pankaj Chaudhary and senior officials of the Ministry of Finance called on President Droupadi Murmu at Rashtrapati Bhavan before presenting the Union Budget. The President expressed best wishes to the Union Finance Minister and her team for the presentation of budget,” President’s office said in a post on X.

Before the actual presentation in Parliament, the Cabinet headed by Prime Minister Narendra Modi approved the Budget for fiscal 2025-26 (April 2025 to March 2026).

With Agency Inputs