Income Tax Slabs Rejig To Hike In Exemption Limit — All About The Budget Bonanza For Middle Class

The 2025 Union Budget, presented amid the cloud over urban consumption, has overhauled the income tax slabs and rates to increase the disposable income of the middle class.

The budget provided significant relief to taxpayers as the tax exemption limit was raised sharply from Rs 7 lakh to Rs 12 lakh. For the salaried class, this limit is further enhanced to Rs 12.75 lakh, considering the standard deduction of Rs 75,000 offered to them under the new tax regime.

The new tax regime, which is already the preferred choice of the country's 72% taxpayers, has been made more lucrative with additional tax slabs and lowering of taxation rates.

The decisions taken by the government shows that it is "responsive", Finance Minister Nirmala Sitharaman highlighted in the post-budget press briefing. In July, it was first announced that a new Income Tax Bill would be introduced to simplify the compliances, and the same will be presented next week, she added.

In her budget speech earlier in the day, the finance minister also announced simplification of tax deducted at source. This, among other measures, includes a hike in threshold for TDS on rent to Rs 6 lakh from the current Rs 2.4 lakh on annual limit.

Right from the expansion of tax slabs to the hiking of TDS threshold limits, here's a quick roundup of all the things that have changed around personal taxes.

While the old tax regime has been left unchanged with existing slabs—Rs 0-2.5 lakh (nil tax), Rs 2.5-5 lakh (5%), Rs 5-10 lakh (20%) and Rs 10 lakh-plus (30%)—the new tax regime has been made more lucrative.

Under the new tax regime, there will be no tax on income from Rs 0 to Rs 4 lakh, 5% tax on income in the range of Rs 4-8 lakh and 10% tax on income in the bracket of Rs 8-12 lakh.

There will be 15% tax on income of Rs 12-16 lakh, 20% on income of Rs 16-20 lakh, and 25% tax on income of Rs 20-24 lakh. Any income above Rs 24 lakh will be taxed at 30%.

"While the exemption applies up to Rs 12 lakh, the rates across income bands have been reduced, ensuring lower taxes for all," Sitharaman said, after the presentation of the Budget. The aim is to benefit the middle class without letting higher incomes escape taxation, she added.

A person having income of Rs 18 lakh will get a benefit of Rs 70,000 in tax, which is 30% of tax payable as per the existing rates, she explained.

Similarly, an individual with an income of Rs 25 lakh gets a benefit of Rs 1,10,000, which is 25% of the tax payable under the existing rates.

Here's a detailed look into how the new tax slabs and rates benefits taxpayers across income categories:

The threshold to collect tax at source on remittances under the RBI’s liberalised remittance scheme is proposed to be increased from Rs 7 lakh to Rs 10 lakh, Sitharaman announced.

The limit for tax deduction on interest for senior citizens has been doubled from the present Rs 50,000 to Rs 1 lakh.

Similarly, the annual limit of Rs 2.4 lakh for TDS on rent is increased to Rs 6 lakh. "This will reduce the number of transactions liable to TDS, thus benefitting small taxpayers receiving small payments," Sitharaman said.

For the interest on securities like bonds, the TDS threshold has been hiked to 10,000 from nil.

The threshold amounts for tax deduction are being raised for "better clarity and uniformity", the finance minister added.

For the interest on fixed deposits, the TDS threshold limit has been hiked to Rs 1 lakh from current Rs 50,000 for senior citizens and for others, it has been raised to Rs 50,000 from Rs 40,000. The Budget also proposed to waive off TCS on remittances for education loans.