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Income Tax Slabs Rejig To Hike In Exemption Limit — All About The Budget Bonanza For Middle Class
"While the exemption applies up to Rs 12 lakh, the rates across income bands have been reduced, ensuring lower taxes for all. The aim is to benefit the middle class without letting higher incomes escape taxation. The new system simplifies and reduces tax incidence for all," Finance Minister Nirmala Sitharaman said, while speaking to state broadcaster Doordarshan.
The annual limit of Rs 2.4 lakh for TDS on rent is being increased to Rs 6 lakh, Sitharaman announced earlier in the day, during her Budget speech. This will reduce the number of transactions liable to TDS, thus benefitting small tax payers receiving small payments.
The revision in income tax rates and slabs under the new regime, along with the increase in tax exemption limit to Rs 12 lakh, provides benefit to a bulk of taxpayers. Check the changes in your tax liability with this income tax calculator.
The Sovereign Gold Bond Scheme is likely to be discontinued, Department of Economic Affairs Secretary Ajay Seth said.
Notably, Sovereign Gold Bonds are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. In recent period, speculations have been rife that the government may discontinue the scheme due to the high cost of financing.
The changes made in the income tax slabs, and increase in the exemption limit, will allow the money to go back into peoples' hands.
In 2014, those who paid over Rs 5 lakh in income tax, are now paying just over Rs 3 lakh, she said, adding that the measures benefit all classes of taxpayers including those earning above Rs 12 lakh.
The government's thought behind the new changes in income tax rules is that those with an average Rs 1-lakh monthly income should not pay tax on the same, Finance Secretary Tuhin Kanta Pandey said at the post-budget press briefing.
This is the reason why the income tax exemption limit has been extended from Rs 7 lakh to Rs 12 lakh, he explained.
The money saved by the taxpayers will help the economy through consumption, savings or investments, he added.
While addressing the press, Finance Minister Nirmala Sitharaman said the decisions taken in the Union Budget show that the government headed by Prime Minister Narendra Modi is "responsive". She pointed out that it was announced in July that Income Tax Bill would be brought to simplify the taxation norms, and the same will be introduced next week.
"This is the first time that a budget has given such a huge tax relief of Rs 1 lakh crore to the middle class. It will enable a boost in consumption, production, investment, and growth in the long term," news agency ANI quoted former NITI Aayog CEO Amitabh Kant as saying.
Sitharaman, in her budget speech, said it is proposed to bring amendment in the law to "provide for that a prescribed reporting entity in respect of a crypto-asset shall furnish information in respect of a transaction in such crypto asset, in a statement as prescribed". It is also proposed to align the definition of virtual digital asset accordingly, she added.
The increase in tax exemption limit to Rs 12 lakh will boost middle-class consumption, while initiatives for MSMEs and labour-intensive sectors like tourism and leather could drive employment, FICCI President Harsha Vardhan Agarwal said.
The income tax exemption limit has risen by 12 times over the past 20 years — from Rs 1 lakh in 2005 to Rs 12 lakh which will be applicable from assessment year 2025-26 onwards. Read more
The revision in income tax rates and slabs under the new regime, along with the increase in tax exemption limit to Rs 12 lakh, provides benefit to a bulk of taxpayers. Check the changes in your tax liability with this income tax calculator.
The relief on income tax is a "positive surprise", veteran investor Vijay Kedia said, as he lauded the government's decision. This move will lead to a boost in consumption, he added.
The 2025 Union Budget, the top highlight of which was the massive revision in income tax slabs, will provide an impetus to consumption, said Confederation of Indian Industries President Sanjiv Puri.
"Usually the focus of the budget is on how the government treasury will be filled, but this budget is exactly the opposite of that. How will this budget fill the pockets of the citizens of the country, how will the savings of the citizens of the country increase and how will the citizens of the country become partners in development," PM Modi said.
The Budget has exempted an income of Rs 12 lakh from tax, and also reduced the tax on those earning higher. This will immensely benefit the middle class. It is also an opportunity for freshers as they would be relieved of taxes, Prime Minister Narendra Modi said, in a virtual address following the presentation of the budget by the finance minister.
Budget 2025: Here's What Experts Think About The New Tax Slabs And Benefits
The rates in force for deduction of income tax at source on income by way of insurance commission shall be reduced from 5% to 2%, "in view of the amendments made vide Finance (No. 2) Act, 2024 in section 194D (payment of insurance commission) with effect from 1st day of April, 2025", according to the Budget memorandum.
Bringing clarity in income on redemption of Unit Linked Insurance Policy, the finance minister clarified that the profit and gains from the redemption of ULIPs to which "exemption under section 10(10D) does not apply", will be charged to tax as capital gains.
Notably, the Finance Act, 2021 made amendments to clause (10D) of section 10 to provide that the exemption under this clause would not apply with respect to any ULIPs issued on or after February 2021, if the amount of premium or aggregate amount of premium payable during the term of such policy or policies exceeds Rs 2.5 lakh.
"This will help the higher income-earners also get some benefit on their taxes. With these changes and the new bill on its way over a week's time, the reading is only getting clearer that new regime will rule the slabs. The almost 70% jump in the slab for rebate is poised to help a lot of tax payers across the country, said Arvind Rao, founder of Arvind Rao & Associates.
Income Tax Changes In Budget 2025: Know Latest Income Tax Slabs; New Regime Vs Old Regime
There was no change in surcharge announced by the finance minister during her budget speech. At present, the surcharge is levied at the rate of 10% for income in the range of Rs 50 lakh to Rs 1 crore, 15% for Rs 1-2 crore, 25% for Rs 2-5 crore. These rates are applicable under both old and new tax regimes. However, for income in excess of Rs 5 crore, the surcharge under old regime stands at 37%, whereas it 25% under the new regime.
The Centre's outreach towards the middle class through the unprecedented revision in income tax slabs is set to benefit a bulk of the taxpayers. Around 72% of those who filed tax returns in the last assessment year had opted under the new tax regime -- whose rates and slabs have been rejigged. Most of the ITR filers in this category had income of less than Rs 12 lakh, which has been totally exempt from taxation.
The rationalisation of TDS and TCS provisions would reduce compliance burden, EY analysts said. It will also result in lower litigations, they added.
A tax payer in the new regime with an income of Rs 12 lakh will get a benefit of Rs 80,000 in tax (which is 100% of tax payable as per existing rates).
A person having income of Rs 18 lakh will get a benefit of Rs 70,000 in tax (30% of tax payable as per existing rates).
A person with an income of Rs 25 lakh gets a benefit of Rs 1,10,000 (25% of his tax payable as per existing rates).
The unprecedented changes in the new income tax regime, which exempts income of up to Rs 12 lakh, will further reduce the appeal of the old tax regime. The tax slabs under the old regime -- which offers more deductions -- has been left unchanged. This means that those under the old regime will continue to be taxed at 5% for income between Rs 2.5 lakh to Rs 5 lakh, 20% between Rs 5 lakh and Rs 10 lakh, and 30% above Rs 10 lakh.
Income Tax Calculator 2025: Calculate Your Income Tax Today
Sitharaman announced that there will be no income tax payable up to income of Rs 12 lakh i.e. average income of Rs 1 lakh per month. However, this exempt income should be other "than special rate income such as capital gains", she clarified.
Presently tax-payers can claim the annual value of self-occupied properties as nil only on the fulfilment of certain conditions. Considering the difficulties faced by taxpayers, it is proposed to allow the benefit of two such self-occupied properties without any condition, Sitharaman said.
A tax payer in the new regime with an income of Rs 12 lakh will get a benefit of Rs 80,000 in tax (which is 100% of tax payable as per existing rates).
A person having income of Rs 18 lakh will get a benefit of Rs 70,000 in tax (30% of tax payable as per existing rates).
A person with an income of Rs 25 lakh gets a benefit of Rs 1,10,000 (25% of his tax payable as per existing rates).
Slabs and rates being changed across the board to benefit all tax-payers, Sitharaman said.
New structure to substantially reduce taxes of middle class and leave more money in their hands, boosting household consumption, savings and investment.
‘Nil tax’ slab up to Rs 12 lakh (Rs 12.75 lakh for salaried tax payers with standard deduction of Rs 75,000).
Read more details here.
A revenue of Rs 1 lakh crore would be forgone for direct taxes, through the rejig in personal tax slabs. Another Rs 2,600 crore revenue would be foregone through relief in indirect taxes.
Rs 0-4 lakh - Nil
Rs 4-8 lakh - 5%
Rs 8-12 lakh - 10%
Rs 12-16 lakh - 15%
Rs 16-20 lakh - 20%
Rs 20-24 lakh - 25%
Rs 24 lakh-plus - 30%
The new tax rates will applicable under the new tax regime.
There will be no income tax levied on annual income up to Rs 12 lakh, Nirmala Sitharaman announced. For salaried individuals, there will be no income tax up to Rs 12.75 lakh, considering the Rs 75,000 in standard deduction.
Nearly 33,000 tax payers have availed the scheme to settle disputes, Finance Minister Nirmala Sitharaman said.
Finance Minister Sitharaman proposes to extend time limit for filing updated return for any assessment year from two years to four years.
TCS on remittances under liberalised remittance scheme proposed to increase from Rs 7 lakh to Rs 10 Lakh.
The limit for tax deduction for senior citizens to be doubled to Rs 1 lakh
TCS on remittances on education will be removed where such loan is taken by financial banks
The annual limit of Rs 2.4 lakh for TDS on rent is raised to Rs 6 lakh.
Delay for payment of TCS up to the due date to be decriminalised.
TCS on remittances if loan is taken for education waived.
Customs duty rates proposed to be further rationalised to support domestic manufacturing and value addition, Sitharaman said. Provision assessment time limit for Customs Act fixed at two years extendable by one year for ease of doing business
On lines of the Jan Vishwas Bill that was introduced earlier to decriminalise around 180 legal provisions, the Jan Vishwas Bill 2.0 to decriminalise more than 100 provisions in various laws will be introduced, Sitharaman said.
In order to provide relief to the patients battling against diseases like cancer, the finance minister announced that 36 more live-saving drugs will be added to the list of medicines fully exempted from customs duty.
Sitharaman proposes to remove seven tariff rates, in addition to the seven revoked in the Budget announced in July.
While the new Income Tax Bill will be presented next week, the details related to personal tax slabs and rates will be shared shortly, during the latter half of Finance Minister Nirmala Sitharaman's Budget speech. Stay tuned here.
The new Income Tax Bill, which is aimed at simplifying the compliance with taxation norms, will be introduced next week, according to Finance Minister Nirmala Sitharaman. The announcement was made by her during the Budget speech.
Budget 2025 Live Updates: Sitharaman Says Jal Jeevan Mission Extended Till 2028; Bihar Gets Notable Mentions
The market would be upset if no measures are announced in the Budget to spur consumption, Edelweiss Mutual Fund CEO Radhika Gupta said, while speaking to NDTV Profit. "Not doing anything on consumption may, perhaps, upset the market."
Anything announced in the Union Budget that will boost urban consumption will be positive, according to Trust Mutual Fund's Mihir Vora.
The middle class is expecting bold reforms on the taxation front, which can increase their disposable income, experts told NDTV Profit. "We need to acknowledge that we are coming out of a time where real income has declined. Households need help. So, you need to do something for the middle class. Tax reduction for the middle class is important, but the government must play on all fronts," said Pankaj Murarka, promoter and investment advisor at Renaissance Investment Managers.
As the name suggests, tax-free bonds refer to bonds that come with tax-free interest income. Under Section 10(15) of the Income Tax Act, 1961, these bonds that are issued by the government or public sector undertakings or PSUs provide an opportunity to earn interest income that is entirely tax-free. Tax-free bonds are usually open for subscription during a specified time. Investors can either buy these bonds during the subscription window, or purchase them through stock exchanges in the secondary market.
This is an ideal investment option for long-term investors, as the tenure typically ranges from 10 to 20 years. These bonds usually come with a fixed interest rate, known as coupon rate, either paid annually or twice a year. Read more.
The agricultural-sector focussed initiatives rolled out in the Union Budget will boost rural spending, analysts at EY pointed out.
There will be a comprehensive program to be implemented for production, supply processing and providing remunerative prices of vegetable and fruits for farmers.
Sitharaman also announced that Kisan Credit Card loan limit will be enhanced from Rs 3 lakh to Rs 5 lakh.
"A country is not just its soil, it is its people. Budget 2025 spans 10 broad areas focusing on garib, youth, annadata and nari. For journey of development agriculture, MSME, investments and exports are engines," the finance minister said. Track the latest on her budget speech here.
As Finance Minister Nirmala Sitharaman starts presenting the budget, taxpayers would remain hooked on the announcements to be made by her on the new tax regime — whether it could be made more lucrative and its structures and rates could be revised. There is also an expectation that standard deduction limit could be raised from Rs 75,000 at present, and the income exemption limit, set at Rs 3 lakh, could be raised further.
The tax rate to be levied on real estate sales, which falls under long-term capital gains, would be in focus. There was criticism from some quarters when the finance minister, in the 2024 Budget, removed indexation benefits on sale of property while lowering the rate from 20% to 12.5%.
Amid the criticism, the government in August said the taxpayers would given the option to be taxed at the rate of 20% along with indexation benefits for the sale of real estate assets acquired before July 23, 2024.
According to Nangia & Co LLP Founder and Managing Partner Rakesh Nangia, the budget should focus on simplification of income tax return (ITR) forms and further rationalisation of capital gains tax and tax deduction at source (TDS) threshold and tax rates.
"The salaried people are hit by inflation as well as burdened in filing ITR forms. Personal income, inflation and compliance income tax slabs need to be rationalised. Basic exemption should hit Rs 10 lakh. Personal I-T salaried people are hardest hit. Standard deduction should be increased so that there is additional cash in their pocket, which would in turn spur consumption," Nangia told news agency PTI.
Apart from an increase in the basic exemption limit to Rs 5 lakh, the middle class anticipates relief through a raise in the standard deduction from Rs 75,000 to Rs 1.25 lakh in the new tax regime and simplification of the new tax regime, according to Asit C. Mehta of Investment Intermediates Ltd.
Tax relief measures for lower- and middle-income households are anticipated, which could stimulate discretionary consumption, Bajaj Broking has said in a Budget 2025 expectations note. The middle class, in particular, expects the basic exemption limit under the new tax regime to be raised from Rs 3 lakh to Rs 5 lakh. "This adjustment aims to reduce the tax burden on lower-income groups and enhance disposable income, thereby boosting consumption. Taxpayers are also hoping increased deductions under Section 80D for health insurance, Section 24(b) for home loan interest, and Section 80C for investments," said Girish Kumar, Research Analyst at Share India Securities. Read more.
Speaking on the possible measures to provide relief to the middle class, Pranav Sayta, national leader of the international tax and transaction services practice at EY, said its more about sentiment than expectation.
"I feel like something will be done, may not be much on the pocket of the middle class. But the fact that the government is thinking about them," he said.
Satya also feels an impetus will be given to Make in India, "maybe through indirect taxes or restoration of concessional tax regime".
Anything announced in the Union Budget that will boost urban consumption will be positive, according to Trust Mutual Fund's Mihir Vora.
There should be some bold thinking on tax cut and relief for middle class, said Edelweiss Mutual Fund CEO Radhika Gupta, while speaking to NDTV Profit. The market would be upset if no measures are announced in the Budget to spur consumption, she added. Read more.
There is a need to increase the relief on buying house, according Parag Thakkar, fund manager at Fort Capital. The government needs to take some measures to address the concerns of the middle class, he said.
"We need to acknowledge that we are coming out of a time where real income has declined. Households need help. So, you need to do something for the middle class. Tax reduction for the middle class is important, but the government must play on all fronts," said Pankaj Murarka, promoter and investment advisor at Renaissance Investment Managers.
The personal income tax rate in India has been "very high", which needs to brought down, Carnelian Asset Management and Advisors' Vikas Khemani told NDTV Profit.
The market would be upset if no measures are announced in the Budget to spur consumption, Edelweiss Mutual Fund CEO Radhika Gupta said, while speaking to NDTV Profit.
"Not doing anything on consumption may, perhaps, upset the market," Gupta said. She also raised question on the lack of pick-up in private capital expenditure. "The worry is that in the last few years, with everything you've done, why hasn't the private sector capex started to pick up? That animal spirit of the Indian economy — why hasn't that kicked off?"
"For the Budget, we are not expecting much in the gold segment. The last Budget exceeded our expectations. We had only expected a 5% rate cut and it was cut by 9%. It was good for the markets," said Vandana Bharti, research head for commodities at SMC Group. There is also a bid for a reduction in transaction taxes along with positive changes for other commodities. "It is important that they at least reduce the the commodity transaction tax or CTT. It is eating up participation as it is not there anywhere else (in any other country). This time we are also expecting the ban on certain agro-commodities being revoked," she said. Read more.
Rahul Arora, CEO of Nirmal Bang Institutional Equities, told NDTV Profit that he does not expect tinkering in taxes in the Budget that will be presented by Finance Minister Nirmala Sitharaman shortly.
The new tax regime, which offers fewer deductions, but lower taxation rates is in focus as around 72% of taxpayers have switched to it from the old tax regime. The government has made it the default tax regime, and has encouraged taxpayers to make the switch. The tweaks in new tax regime slabs, along with increase in standard deduction from Rs 50,000 to Rs 75,000, allowed taxpayers to save around Rs 17,400 annually, the government had said in July. Speculations are rife that the finance minister may announce measures that make the new tax regime more lucrative.
"Taxpayers are hoping for an enhanced rebate for lower-income individuals and an increase in the basic exemption limit under both tax regimes to help offset inflation," said Chopra. "To help conserve taxpayers' resources, the turnover limit for taxation on a presumptive basis under Sections 44AD (for businesses) and 44ADA (for professionals) should be increased," he added.
HRA is a part of your salary income. So, it is initially considered a part of your taxable income. However, if you live in a rented accommodation, you can claim a tax exemption. One can either do a partial or whole claim under Section 10 of the Income Tax Act. It is important to note that this is if one does not live in a rented accommodation, this allowance is fully taxable. Read more.
Under Section 80C, which is applicable under the old tax regime, the amount paid towards the principal of your home loan offers the benefit of tax deductions. The maximum housing loan tax exemption is Rs 1.5 lakh a year. One can avail these benefits if the evidence that the funds were used for the specific purpose can be given.
Further, if one takes a personal loan to renovate or repair their house, then they are eligible for a tax deduction under Section 24 of the Income Tax Act. One can claim deductions of up to Rs 30,000 per year on the interest paid on a personal loan. Read more
Budget 2025 Live Updates: Nirmala Sitharaman Leaves Her Residence; Officials Prepare At Finance Ministry
ELSS funds on an average deliver 12% to 15% returns. These schemes also come in with a lock-in period of three years.
A unit-linked insurance plan, or a ULIP, will bring the investor an 8% to 10% interest. These units will have a five-year lock-in period.
Investing in a Public Provident Fund will return 7.90% interest. This investment comes with a lock-in period of 15 years as well.
Sukanya Samriddhi Yojana is also a scheme that taxpayers can invest in. This scheme gives an 8.50% interest.
NPS scheme, while is not covered under Section 80C, allows taxpayers to claim an additional deduction of Rs 50,000 under Section 80CCD (1B). This option can deliver with an 8% to 10% interest rate.
Section 80C broadly includes contributions to insurance premiums, public provident funds, employee provident funds, national savings certificates, equity-linked savings scheme mutual funds, children's school fees, and payment of principal in housing loans, among other things.
An individual can invest up to Rs 1,50,000 every year. This can be claimed as a deduction every year from the gross total income of the taxpayer as well. It is also important to note that companies and partnership firms cannot avail themselves of the benefits of this deduction.
The Section 80C benefits are not available for taxpayers under the new tax regime.
The new structure levied no tax on income up to Rs 3 lakh. Income from Rs 3 lakh to Rs 7 lakh is taxed at 5% and income from Rs 7 lakh to Rs 10 lakh is taxed at 10%. Income from Rs 10 lakh to Rs 12 lakh is taxed at 15% and income from Rs 12 lakh to Rs 15 lakh is taxed at 20%. Income earned above Rs 15 lakh is taxed at 30%.
The first two income brackets have been extended by a lakh and the brackets of the last two slabs remain unchanged. The government had also announced an increase in the standard deduction to Rs 75,000 from Rs 50,000 during the last Union Budget. This move aimed to benefit salaried individuals, providing them with higher tax savings and greater disposable income.
While the probability of change in structure is limited, changes to benefit the tax payers have higher bets. "My expectation on the tax front is some relief for middle class taxpayers, especially in the new tax regime, by expanding the tax slabs," said Arnav Pandya, founder of Moneyeduschool. Read more.
In the 2024 Union Budget, the tax on long-term capital gains was increased from 10% to 12.5%, but the exemption limit was raised from Rs 1 lakh to Rs 1.25 lakh. This had drawn some criticism, as arguments were made that the increase in taxes may disincentivise people from investing in long-term asset classes.
Apart from the personal income tax slabs, the focus of taxpayers during Finance Minister Nirmala Sitharaman's Union Budget 2025 speech would be on any potential revisions in the short-term capital gains tax. In the Budget 2024, the STCG tax was raised to 20% from 15%. This covers the gains made on listed equity shares and mutual funds, and units of business trusts held for a short-term period, i.e. less than 12 months.
There is anticipation over likely measures to be announced in the Union Budget 2025 that can further simplify the taxation norms. The government is also expected to separately roll out the Direct Tax Code — the new income tax bill which will be aimed at simplifying compliance.
Good morning, readers! Welcome to the NDTV Profit's live blog coverage on income tax announcements in the Union Budget 2025, which will be presented today by Finance Minister Nirmala Sitharaman. Speculations are rife that some relief could be on the cards for the middle class, as the government might look to raise the disposable income to address the lull in urban consumption. Will the tax rates be tweaked, or slabs be revised? Will the new tax regime be made more lucrative? Will revisions be made to taxes on long-term and short-term capital gains? Stay tuned here to find out.
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