Zero Income Tax Up to ₹12.75 Lakh & Slab Overhaul to Empower Middle Class

0
Zero Income Tax Up to ₹12.75 Lakh

Key Highlights:

  1. Historic Tax Relief: New regime introduces zero tax on income up to ₹12 lakh (₹12.75 lakh for salaried with standard deduction).
  2. Rebalanced Slabs: Tax rates reduced across all brackets to boost disposable income and consumption.
  3. Middle-Class Focus: Annual savings of ₹25,000–1.5 lakh for earners between ₹12–30 lakh.
  4. Economic Stimulus: Aims to inject ₹65,000 crore into household budgets, fueling savings and investments.
  5. Salary Bonus: ₹75,000 standard deduction retained for salaried taxpayers, shielding more income.

Budget 2025’s Tax Tsunami: Middle Class to Keep More, Spend More, Save More

New Delhi: In a historic move to revive household spending and empower India’s middle class, Finance Minister Nirmala Sitharaman unveiled a radical overhaul of the New Tax Regime during her Union Budget 2025-26 speech. Effective April 1, 2025, the revised structure eliminates income tax for earnings up to ₹12 lakh (₹12.75 lakh for salaried individuals) and slashes rates across higher brackets, marking the largest tax cut for middle-income earners in a decade.

New Tax Slabs: Simplified for Maximum Savings

For General Taxpayers:

  • ₹0–12 lakh: 0% tax
  • ₹12–15 lakh: 10% (vs. 20% earlier)
  • ₹15–20 lakh: 20% (vs. 30% earlier)
  • Above ₹20 lakh: 30%

For Salaried Individuals (with ₹75k standard deduction):

  • ₹0–12.75 lakh: 0% tax
  • ₹12.75–15.75 lakh: 10%
  • ₹15.75–20.75 lakh: 20%
  • Above ₹20.75 lakh: 30%

Example:

  • A ₹15 lakh earner saves ₹52,500/year (old liability: ₹1.17 lakh → new: ₹64,500).
  • A ₹20 lakh earner saves ₹1.15 lakh/year (old: ₹3.12 lakh → new: ₹1.97 lakh).

Why This Matters

  • Middle-Class Respite: 93% of India’s 8.4 crore taxpayers earn under ₹15 lakh.
  • Consumption Boost: ₹65,000 crore annual savings could spike demand in real estate, autos, and electronics.
  • Investor Sentiment: Analysts predict a 15–20% surge in SIP inflows as disposable income rises.

Government’s Vision: Growth Through Empowerment

Sitharaman stated: “This reform isn’t just about tax cuts it’s about restoring purchasing power and driving India’s next growth wave.” The cuts align with the Modi government’s goal to:

  1. Revive Rural Demand: Farmers and MSMEs to benefit from increased urban spending.
  2. Reduce Compliance: Merge 18 exemptions into 5 broad categories.
  3. Curb Litigation: Simplified slabs could reduce disputes by 40% (CBDT estimate).

Behind the Math: Financing the Cuts

To offset ₹2.1 lakh crore in foregone revenue, the government plans:

  • GST Rationalization: Hike rates on luxury goods (cars, electronics).
  • Windfall Taxes: Extend levies on oil, mining, and pharma sectors.
  • Asset Monetization: Raise ₹1.5 lakh crore via highways, railways, and pipeline leases.

Industry & Expert Reactions

  • RBI Governor Shaktikanta Das: “A growth-positive step amid inflationary pressures.”
  • NITI Aayog: Projects 0.6% GDP boost from heightened consumption.
  • Critics: Opposition questions sustainability, citing deficit risks.

A New Dawn for Taxpayers

The 2025 tax overhaul redefines India’s fiscal priorities shifting from austerity to empowerment. With households retaining more income, sectors like housing, EVs, and fintech are poised for a demand surge. As Sitharaman declared: “This Budget is not just an account of numbers it’s a pact of trust with India’s aspirational millions.”

*

Advertisement