In a major relief to taxpayers, Finance Minister Nirmala Sitharaman announced that under the new tax regime, individuals earning up to ₹12 lakh annually (₹12.75 lakh with standard deductions) will not have to pay any income tax. This move is expected to benefit the middle-class segment and increase disposable income.
Revised Tax Slabs Under the New Regime
The government has introduced the following revised tax slabs for the new regime:
- Income up to ₹4 lakh – No tax
- ₹4 lakh – ₹8 lakh – 5%
- ₹8 lakh – ₹12 lakh – 10%
- ₹12 lakh – ₹16 lakh – 15%
- ₹16 lakh – ₹20 lakh – 20%
- ₹20 lakh – ₹24 lakh – 25%
- Above ₹24 lakh – 30%
These changes are designed to provide relief to taxpayers and encourage savings and investments.
Additional Tax-Related Announcements
Apart from the revised slabs, several other tax-related measures were introduced:
- TDS Rationalization: The government plans to rationalize tax deduction at source (TDS) rates.
- Higher Tax Deduction Limit for Senior Citizens: The tax deduction limit for senior citizens has been doubled to ₹1 lakh.
- Extended Deadline for Filing Updated Returns: Taxpayers will now have up to four years to file updated returns, allowing greater flexibility and compliance.
Introduction of a New Direct Tax Code
The Budget also confirmed the introduction of a new Direct Tax Code, replacing the Income Tax Act of 1961. The new code aims to simplify tax compliance, reduce legal complexities, and eliminate the option of choosing between old and new tax regimes.
Expected changes include:
- Elimination of financial year (FY) and assessment year (AY) distinctions.
- Standardized 15% tax on dividend income.
- 5% tax on insurance income from Life Insurance Corporation (LIC) policies.
Conclusion
The new tax regime under Budget 2025 significantly benefits middle-class taxpayers by reducing their tax burden and encouraging economic growth. The introduction of the Direct Tax Code will further streamline tax laws, making compliance easier for individuals and businesses alike.
