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Significant Changes in Income Tax Structure
In a landmark move, Finance Minister Nirmala Sitharaman announced substantial tax relief for middle-income individuals in the 2025 Union Budget. The new tax regime exempts individuals earning up to ₹12 lakh annually from paying income tax, aiming to boost disposable income and stimulate economic growth.
Revised Tax Slabs
The updated tax structure introduces several changes:
- Income up to ₹4 lakh: No tax
- Income between ₹4 lakh and ₹8 lakh: 5%
- Income between ₹8 lakh and ₹12 lakh: 10%
- Income between ₹12 lakh and ₹16 lakh: 15%
- Income between ₹16 lakh and ₹20 lakh: 20%
- Income between ₹20 lakh and ₹24 lakh: 25%
- Income above ₹24 lakh: 30%
This restructuring is designed to provide significant relief to the middle class, with individuals earning ₹12 lakh annually benefiting from an ₹80,000 tax reduction.
Economic Implications
The government anticipates that these tax cuts will enhance consumer spending, thereby invigorating the economy. However, to maintain fiscal discipline, the budget also outlines a plan to reduce the fiscal deficit to 4.4% of GDP. This includes a borrowing strategy of ₹14.82 trillion through bonds to fund the deficit.
