Budget 2025: No Income Tax Up to ₹12 Lakh – Big Relief for Middle Class

Prelude

Union Budget 2025 brings huge tax relief! No income tax on earnings up to ₹12 lakh. Finance Minister Nirmala Sitharaman has delivered Union Budget 2025-26, and it’s a game-changer for taxpayers. With a new tax regime offering zero income tax up to ₹12 lakh, this budget is set to boost disposable income and simplify the taxation process. But how does it compare with the old regime? Should you switch?

Let’s dive into the key highlights, latest tax slabs, and expert insights on how this budget benefits you.

Budget 2025: Major Tax Relief for Middle-Class Taxpayers

New Income Tax Slabs (2025-26) – No Tax Up to ₹12 Lakh

The government has revamped the income tax structure to provide more relief and encourage spending. Here’s a quick breakdown of the new tax slabs:

1. Up to ₹4 lakh – No tax
2. ₹4 lakh – ₹8 lakh – 5% tax
3. ₹8 lakh – ₹12 lakh – 10% tax
4. ₹12 lakh – ₹16 lakh – 15% tax
5. ₹16 lakh – ₹20 lakh – 20% tax
6. ₹20 lakh – ₹24 lakh – 25% tax
7. Above ₹24 lakh – 30% tax

Key Benefits:

1. Lower tax rates compared to the Old Tax Regime.
2. No tax on income up to ₹4 lakh.
3. Simpler tax filing, as there are no deductions or exemptions.

Drawback:

No deductions available, so you lose out on benefits like HRA, LTA, 80C deductions, etc.

Old Income Tax Slabs (For Those Who Opt for the Previous Regime)

1. Up to ₹2.5 lakh – No tax
2. ₹2.5 lakh – ₹5 lakh – 5% tax
3. ₹5 lakh – ₹10 lakh – 20% tax
4. Above ₹10 lakh – 30% tax

Key Benefits:

1. You can claim various deductions (such as for home loan interest, insurance premiums, and contributions to provident fund, etc.).
2. More flexibility if you have eligible deductions and exemptions.

Drawback:

1. Higher tax rates in some cases.
2. More complex tax filing, as you need to keep track of various deductions and exemptions.

Key Takeaway: Under the new tax regime, individuals earning up to ₹12 lakh will pay zero income tax, making it a huge win for the middle class.

New vs. Old Tax Regime – Which One is Better for You?

The government now offers two tax structures.

So, Which One Should You Choose?

Choose the New Tax Regime if:

1. You prefer simplicity and don’t have many deductions to claim.
2. You want lower tax rates on your income.

Choose the Old Tax Regime if:

1. You have significant deductions (like home loan interest or medical insurance) that can help you reduce your taxable income.
2. You prefer to maximize exemptions like HRA or LTA.

In short, the New Tax Regime is ideal for those who want simplicity and lower tax rates, while the Old Tax Regime suits those who have many deductions and exemptions to reduce their overall taxable income.

Key Benefits of Budget 2025 for Taxpayers

Higher Disposable Income

With no tax on income up to ₹12 lakh, individuals will have more money to spend, save, or invest.

Simpler Tax Filing Process

The new structure eliminates complex exemptions and deductions, making tax filing hassle-free.

Boost to Economy

With more disposable income, spending will increase, helping the economy grow faster.

Higher Standard Deduction

The standard deduction has been raised to ₹75,000, offering additional relief.

Section 87A Rebate for Middle Class

People earning up to ₹7 lakh will get ₹25,000 rebate, reducing their tax burden.

How Will Budget 2025 Impact Salaried Employees?

1. Employees earning ₹12 lakh or less will pay zero income tax.
2. The higher standard deduction will reduce taxable income.
3. People in the ₹12-16 lakh bracket will now pay only 15% tax, much lower than before.
4. Those preferring exemptions (HRA, LTA, 80C) can still opt for the old regime.

Pro Tip: If you don’t claim many deductions, the new regime is likely the better choice.

How to Choose Between the Old & New Tax Regime?

1. If you claim many deductions (HRA, 80C, LTA, home loan interest), the old regime might be beneficial.
2. If you want lower tax rates and a simpler process, go for the new regime.

Pro Tip: Use a Tax Calculator to determine which option saves you more money.

FAQs on Budget 2025 and Income Tax Changes

1. Is it true that there is no income tax up to ₹12 lakh?

Yes, under the new tax regime, individuals earning ₹12 lakh or less will pay zero tax.

2. Can I still choose the old tax regime?

Yes, you can opt for the old tax regime if you prefer exemptions and deductions.

3. What is the new Section 87A rebate?

Under the new tax regime, individuals earning up to ₹7 lakh get a ₹25,000 rebate, reducing their tax liability.

4. What are the major benefits of the new tax regime?

The new regime offers zero tax on ₹12 lakh, simpler filing, and higher standard deduction.

5. How can I calculate which tax regime is better for me?

Use an online tax calculator or consult a financial expert to compare savings.

Final Thoughts: Is Budget 2025 a Game-Changer?

Budget 2025 is one of the most taxpayer-friendly budgets in recent years. With no tax on ₹12 lakh, higher standard deduction, and simplified tax slabs, it’s a big win for the middle class.

If you don’t claim many deductions, the new tax regime is likely better for you. However, if you benefit from multiple exemptions, you may consider sticking to the old regime.

What do you think of this budget? Share your thoughts in the comments below!

Ready to maximize your tax savings? Share this article and help others understand the Budget 2025 changes!

TN HEADLINES24 INSIGHTS

The Union Budget 2025 has brought significant tax relief for the middle class by eliminating income tax up to ₹12 lakh. This move is expected to increase disposable income, boost consumer spending, and simplify tax compliance. However, taxpayers must carefully evaluate whether the new tax regime is beneficial for them compared to the old one, which still allows deductions and exemptions.

TN HEADLINES24 READERS’ INSIGHTS

We want to hear from you!

Do you think the new tax regime will improve your financial situation?

Will you switch to the new tax structure or stick to the old one?

What additional reforms would you like to see in upcoming budgets?

Drop your thoughts in the comments section and join the discussion!

TN HEADLINES24 BOTTOM LINE

1. No tax on income up to ₹12 lakh under the new tax regime is a major relief.
2. Higher standard deduction of ₹75,000 benefits salaried individuals.
3. The new regime is simpler, but the old regime still offers deductions.
4. Taxpayers should calculate their savings before choosing between regimes.
5. This budget aims to boost spending and strengthen the economy.

Also read: TN HEADLINES24 

TN HEADLINES24 QUIZ | TEST YOURSELF

1. What is the tax-free income limit in the new tax regime?

A) ₹10 lakh

B) ₹12 lakh

C) ₹8 lakh

D) ₹15 lakh

2. Under the new tax regime, what is the tax rate for income between ₹8 lakh and ₹12 lakh?

A) 5%

B) 10%

C) 15%

D) 20%

3. What is the standard deduction in the new tax regime?

A) ₹50,000

B) ₹60,000

C) ₹75,000

D) ₹80,000

4. How much rebate is available under Section 87A in the new tax regime?

A) ₹15,000

B) ₹20,000

C) ₹25,000

D) ₹30,000

5. What is the highest tax rate in both regimes?

A) 25%

B) 30%

C) 35%

D) 40%

6. Who presented the Union Budget 2025?

A) Piyush Goyal

B) Arun Jaitley

C) Nirmala Sitharaman

D) Narendra Modi

7. What is the tax rate for income between ₹16 lakh and ₹20 lakh in the new regime?

A) 10%

B) 15%

C) 20%

D) 25%

8. The old tax regime is better for individuals who:

A) Want fewer deductions

B) Prefer multiple exemptions

C) Have no investments

D) Earn above ₹20 lakh

9. Which of these is not a benefit of the new tax regime?

A) Higher deductions

B) Simplicity

C) Lower tax rates

D) No exemptions

10. What is the main goal of Budget 2025’s tax reforms?

A) Increase government revenue

B) Reduce fiscal deficit

C) Boost economic growth

D) Increase corporate taxes

TN HEADLINES24 | VOCABULARY CHALLENGE

1. What does “Disposable Income” mean?

A) Total salary before deductions

B) Money left after taxes

C) Business earnings

D) Investment profit

2. The word “Rebate” in taxation refers to:

A) Tax deduction

B) Refund of excess tax

C) Complete tax exemption

D) Penalty on unpaid tax

3. “Standard Deduction” applies to:

A) Business owners

B) Salaried individuals

C) Freelancers

D) Agricultural workers

4. What does “Fiscal Policy” relate to?

A) Stock market investments

B) Government revenue and spending

C) Inflation rate

D) Foreign trade

5. “Taxpayer-friendly” means:

A) Increased tax burden

B) Higher tax exemptions and relief

C) Strict regulations

D) More penalties

6. “Middle Class” in taxation usually refers to:

A) Individuals earning above ₹50 lakh

B) Salaried professionals

C) Only business owners

D) High-net-worth individuals

7. The term “Exemption” in tax refers to:

A) Mandatory tax payment

B) Income that is not taxable

C) Additional tax liability

D) Late payment penalty

8. “Progressive Tax System” means:

A) Everyone pays the same tax rate

B) Higher income = Higher tax rate

C) Fixed percentage for all income groups

D) No tax on high earners

9. What does “Economic Growth” imply?

A) Increasing unemployment

B) Declining GDP

C) Rising national income and productivity

D) Higher loan interest rates

10. “Simplicity in taxation” means:

A) Complex tax laws

B) Reduced exemptions and fewer slabs

C) More documentation

D) Higher tax rates

ANSWER

TN HEADLINES24 QUIZ | TEST YOURSELF

1.B | 2.B | 3.C | 4.C | 5.B | 6.C | 7.C | 8.B | 9.A | 10.C

TN HEADLINES24 | VOCABULARY CHALLENGE

1.B | 2.B | 3.B | 4.B | 5.B | 6.B | 7.B | 8.B | 9.C | 10.B

Disclaimer: The information in this article is for informational purposes only and not financial advice. TN HEADLINES24 does not guarantee accuracy, and readers should consult a tax professional before making decisions. Tax policies may change, so refer to official sources for confirmation. TN HEADLINES24 is not liable for any financial losses incurred. By reading, you acknowledge that TN HEADLINES24 does not provide tax or legal advice.