New income tax Slabs Released in Budget for FY 2025-26 Check full Details

New Income Tax Slabs Introduced in Union Budget 2025-26: A Historic Relief for Taxpayers In a groundbreaking move, Union Finance Minister Nirmala Sitharaman unveiled significant changes to India’s income tax system during the presentation of the Union Budget for 2025-26. The revised tax structure brings substantial relief to taxpayers, with major benefits for those earning up to ₹12 lakh annually. Let’s break down the key changes and understand their implications.

Key Changes in Income Tax Slabs: A Comprehensive Overview

The new tax slabs, as proposed in the 2025 Budget, reflect a clear shift towards easing the burden on middle-income earners. This revised structure offers a more progressive taxation system, with considerable relief for taxpayers in lower and middle-income brackets.

Income Tax Slabs for Individuals Under the New Tax Regime

The Finance Minister’s announcement introduces a revised tax structure that extends the benefit of zero tax liability to those earning up to ₹12 lakh. Here’s a breakdown of the new tax slabs:

The most striking aspect of this revised structure is the zero tax rate for individuals earning up to ₹12 lakh. This move aims to ease the financial burden on the middle class and help boost disposable income.

Tax Rebate for Incomes Up to ₹12 Lakh: The Game-Changer

One of the most historic announcements in the Union Budget 2025 is the introduction of a tax rebate for those earning up to ₹12 lakh. Previously, individuals with an income of ₹12 lakh were paying a tax of ₹80,000 under the old tax slabs. Now, under the revised scheme, the net tax payable will be zero for such individuals due to a combination of reduced slab rates and the rebate.

For example, an individual earning ₹12 lakh annually would have paid ₹80,000 in taxes before the revision. However, with the new structure and the additional rebate, this tax will be reduced to ₹60,000, and ultimately, the net tax payable will become zero due to the rebate.

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Increased Focus on Taxpayer Ease: Two Tax Regimes to Choose From

Taxpayers now have the flexibility to choose between two tax regimes — the old tax regime and the new tax regime. The new regime, which was introduced in 2020, offers lower rates but does not allow for exemptions or deductions. In contrast, the old regime allows individuals to claim exemptions on housing rentals, insurance premiums, and long-term investments, though it comes with higher rates.

A Closer Look at the Reforms in the Budget

The income tax reforms presented in the Union Budget 2025-26 reflect the government’s commitment to addressing the needs of the common taxpayer while maintaining fiscal discipline. Here’s an overview of other notable changes introduced:

1. Standard Deduction Increased for Salaried Taxpayers

The Budget has also proposed an increase in the standard deduction for salaried individuals, making it easier for middle-class families to save more on taxes. The deduction ceiling has been raised to ₹75,000, up from ₹50,000 in the previous year. Additionally, family pensioners will benefit from an increase in the family pension deduction, which has now been set at ₹25,000, up from ₹15,000.

2. Greater Relief for the Middle Class

The tax relief provided to individuals with incomes up to ₹12 lakh is part of a broader effort by the government to alleviate the financial strain on the middle class. This reduction in tax burden is expected to increase disposable income and encourage more spending, which could provide a boost to the economy.

3. Impact on Capital Gains Taxation

The Budget also touched upon changes related to special rate income, such as capital gains. However, the most immediate and significant benefit of the Budget is related to personal income tax slabs, which will directly impact the majority of taxpayers.

4. Continued Relevance of Old Tax Regime

Despite the advantages of the new tax regime, the government has reiterated that the old tax regime remains in place. Taxpayers who prefer the exemptions and deductions allowed under the old regime can continue to avail of them. This ensures that there is flexibility, and individuals can choose the tax structure that best fits their financial situation.

Historical Context: Comparison with Previous Budgets

This new income tax slab structure represents a significant departure from previous Budgets. In the 2024 Union Budget, Finance Minister Nirmala Sitharaman had already introduced notable changes, including an increase in the standard deduction ceiling and various reforms aimed at easing the tax burden. The measures introduced in the 2025 Budget further amplify these efforts, ensuring that taxpayers, especially in the lower and middle-income brackets, experience substantial relief.

The Road Ahead: What This Means for Taxpayers

The revisions introduced in the Union Budget 2025-26 reflect the government’s ongoing efforts to create a more taxpayer-friendly system. The combination of reduced tax rates, the introduction of rebates, and the option to choose between tax regimes empowers taxpayers to make decisions based on their financial circumstances.

A Major Boost for Middle-Class Taxpayers

For middle-class taxpayers earning up to ₹12 lakh annually, the reduction in the tax burden is a game-changer. The introduction of the tax rebate, along with the lower slab rates, is expected to result in substantial savings. This is likely to have a ripple effect on the overall economy, as more disposable income will likely lead to higher consumer spending.

Key Highlights of the New Income Tax Slabs

Additional Changes:

• Standard Deduction for salaried taxpayers raised to ₹75,000.
• Family pensioners benefit from an increased deduction of ₹25,000.
• No tax payable for individuals earning up to ₹12 lakh annually.

The 2025 Budget marks a bold step in simplifying the income tax structure while providing substantial relief to the average taxpayer. These reforms are expected to have a far-reaching impact on the Indian economy, benefiting millions of middle-class families.

This updated structure aims to make the taxation system more inclusive and progressive while reducing the burden on taxpayers. What do you think of the new tax slabs? Do you think the changes will benefit you or your family?