Budget 2025’s Biggest Cheer: Tax-Free Income Up to ₹12 Lakh
No Income Tax Till ₹12 Lakh: Budget 2025 Brings Big Relief for the Middle Class: In a surprise announcement that has struck a chord with millions of Indian taxpayers, Finance Minister Nirmala Sitharaman declared that under the new tax regime, individuals earning up to ₹12 lakh per year will now pay zero income tax. This marks a historic shift in India’s direct tax structure and provides a significant boost to middle-class households, who’ve long called for better relief in a time of rising expenses.
New Tax Slabs: More Savings, Less Stress
Under the revised slab system for FY 2025–26, taxpayers will enjoy lower rates across broader income ranges. Here’s how the new structure looks:
Rs 0–4 lakh: 0%
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%
Above Rs 24 lakh: 30%
This progressive structure ensures that the financial burden reduces considerably for salaried individuals and small business owners, while higher earners still contribute fairly.
What This Means for the Middle Class
For the average salaried person earning ₹10–₹12 lakh annually, this change translates to thousands of rupees in savings every year. Earlier, tax liability would have ranged around ₹80,000–₹1 lakh for this group. Now, with the 0% tax up to ₹12 lakh, more money remains in their hands—for spending, saving, or investing.
This move acknowledges that the middle class is the engine of India’s consumer economy. In her speech, the Finance Minister praised their economic contributions and reaffirmed the government’s intent to “periodically reduce tax burdens” on them.
How This Affects Higher Income Groups
Those earning above ₹12 lakh will still benefit from reduced rates up to that threshold, but will begin paying tax on income beyond that point. The highest tax bracket remains at 30%, which applies to those earning over ₹24 lakh. So while the wealthy still shoulder the bulk of the tax burden, the early slabs offer universal relief.
Static GK Snapshot: Union Budget 2025 Income Tax
| Fact | Details |
| Announcement Date | February 1, 2025 |
| Announced by | FM Nirmala Sitharaman |
| New Tax Exemption Limit | Up to ₹12 lakh (under new regime) |
| First Tax Slab | 5% from ₹4 to ₹8 lakh |
| Previous Tax-Free Limit (2023) | ₹7 lakh under new regime |
| Top Tax Rate | 30% for income above ₹24 lakh |
| Static Tax System Feature | Optional—Old regime still exists |
