In the Union Budget 2025, FM Nirmala Sitharaman announced significant reforms to Indiaβs tax structure, aiming to provide substantial relief to the middle class and stimulate economic growth. The revised tax slabs under the new tax regime are designed to reduce the tax burden on individuals, thereby increasing disposable income and encouraging consumption and investment.
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Revised Income Tax Slabs for FY 2025-26
The new tax regime introduces the following income tax slabs:
- βΉ0 to βΉ4 lakh: Nil
- βΉ4 to βΉ8 lakh: 5%
- βΉ8 to βΉ12 lakh: 10%
- βΉ12 to βΉ16 lakh: 15%
- βΉ16 to βΉ20 lakh: 20%
- βΉ20 to βΉ24 lakh: 25%
- Above βΉ24 lakh: 30%
Individuals with an annual income of up to βΉ4 lakh are not subject to income tax under this framework. For those earning between βΉ4 lakh and βΉ8 lakh, a tax rate of 5% is applicable, while incomes ranging from βΉ8 lakh to βΉ12 lakh will incur a 10% tax rate. The maximum tax rate of 30% is imposed on incomes that surpass βΉ24 lakh.
Impact on the Middle Class
The revised tax slabs are expected to provide significant benefits to the middle class. By increasing the tax exemption limit and adjusting the rates across various income brackets, the government aims to leave more money in the hands of taxpayers. This increase in disposable income is anticipated to boost household consumption, savings, and investment, thereby stimulating economic growth.
Prime Minister Narendra Modi emphasized that the tax rebate will provide substantial benefits to the middle class, aligning with the governmentβs commitment to their welfare.
Introduction of a New Income Tax Bill
In addition to the revised tax slabs, Finance Minister Sitharaman announced the introduction of a new Income Tax bill in Parliament. While details of the bill are awaited, it is expected to further streamline tax processes and enhance compliance.
Comparison with the Old Tax Regime
Previously, taxpayers could choose between two tax regimes:
- Old Tax Regime: Allowed exemptions on housing rentals, insurance, and other investments.
- New Tax Regime: Introduced in 2020, offered lower tax rates but did not permit major exemptions.
The revised tax slabs under the new regime aim to make it more attractive by simplifying the structure and reducing tax rates, thereby encouraging more taxpayers to adopt it.
Steps to Calculate Your Income Tax
Taxpayers can calculate their income tax liability using the Tax Calculator available on the Income Tax Departmentβs official website. Hereβs how:
- Visit the e-filing home page.
- Select βQuick Linksβ and choose βTax Calculatorβ.
- Choose between Basic and Advanced Calculator:
- Basic Calculator: Enter details like Assessment Year, taxpayer category, age, residential status, total annual income, and total deductions.
- Advanced Calculator: In addition to the above, enter preferred tax regime, due date, and actual date of submission of return.
The calculator will provide an estimate of your tax liability based on the entered details.
Conclusion
The Union Budget 2025 presents notable modifications to the income tax framework, with the objective of offering relief to the middle class and boosting economic activity. Taxpayers are urged to become acquainted with the revised tax brackets and to take advantage of available resources to gain a clearer understanding of their tax obligations.
As the government maintains its emphasis on economic development and fiscal discipline, these initiatives are anticipated to significantly influence Indiaβs financial environment.
