Changes in Income Tax Slabs in India's Budget 2025
his article explains the changes in income tax slabs introduced in India's Union Budget 2025, highlighting the exemption for individuals earning up to ₹12 lakh annually. It details the revised tax structure, new tax rates, and their impact on taxpayers. The article also discusses how these changes will reduce the tax burden on the middle class, encourage higher disposable income, and simplify the process of filing income tax returns. Additionally, it compares the new and old tax regimes to help taxpayers make informed financial decisions
The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, introduced significant revisions to the income tax structure, aiming to provide relief to taxpayers and stimulate economic growth. These changes are expected to increase disposable incomes, thereby boosting consumption, savings, and investment.
Revised Income Tax Slabs
The new tax regime has restructured the income tax slabs as follows:
| Annual Income (₹) | Tax Rate |
|---|---|
| 0 – 4,00,000 | Nil |
| 4,00,001 – 8,00,000 | 5% |
| 8,00,001 – 12,00,000 | 10% |
| 12,00,001 – 16,00,000 | 15% |
| 16,00,001 – 20,00,000 | 20% |
| 20,00,001 – 24,00,000 | 25% |
| Above 24,00,000 | 30% |
Notably, individuals with an annual income of up to ₹12 lakh will not be required to pay any income tax, due to the enhanced rebate under the new tax regime.
Impact on Taxpayers
The revised tax slabs are designed to reduce the tax burden on the middle class. For instance, under the new structure, an individual earning ₹10 lakh annually would fall into the 10% tax bracket, resulting in a tax liability of ₹60,000 (calculated as 5% of ₹4 lakh plus 10% of ₹2 lakh). Previously, the same individual would have been taxed at higher rates, leading to greater tax liability.
These adjustments are anticipated to leave more disposable income in the hands of taxpayers, encouraging higher spending and investment. The government estimates that approximately 6.3 crore people, or more than 80% of taxpayers, who earn up to ₹12 lakh a year, will benefit from these tax cuts.
Comparison with Previous Tax Regime
Under the previous tax regime, the income tax slabs were:
| Annual Income (₹) | Tax Rate |
|---|---|
| 0 – 2,50,000 | Nil |
| 2,50,001 – 5,00,000 | 5% |
| 5,00,001 – 10,00,000 | 20% |
| Above 10,00,000 | 30% |
The new tax regime not only increases the income thresholds for lower tax rates but also introduces more granular tax brackets, providing a more progressive tax structure.
Filing Income Tax Returns
With the revised tax slabs, it is crucial for taxpayers to understand their tax liabilities and file their income tax returns (ITR) accurately. The government encourages taxpayers to adopt the new tax regime, which offers lower rates with fewer exemptions, simplifying the ITR filing process. Taxpayers should assess their financial situations to determine which regime—new or old—best suits their needs.
Conclusion
The changes in income tax slabs announced in Budget 2025 reflect the government's commitment to easing the tax burden on the middle class and stimulating economic activity. Taxpayers are advised to familiarize themselves with the new tax structure and plan their finances accordingly to maximize their benefits.
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