In the recently presented budget, the finance minister has given a big relief to the middle class by eliminating income tax for those earning up to Rs 12 lakh under the new tax system. Individuals earning Rs 18 lakh will get the benefit of a tax exemption of Rs 70,000, while those earning Rs 12 lakh will get a tax exemption of Rs 80,000. Finance Minister Nirmala Sitharaman has made a remarkable impact in her first full budget during the third term of the Modi government. Earlier, only people with an annual income of up to Rs 7 lakh were exempted from income tax, but now this limit has been increased to Rs 12 lakh. Additionally, salaried individuals will get the benefit of a standard deduction of Rs 75,000, which means those earning up to Rs 12.75 lakh will not have to pay any income tax. However, anyone earning more than this limit will still be taxed.

Individuals with an annual income of Rs 18 lakh will get a tax exemption benefit of Rs 70,000, while those with an annual income of Rs 12 lakh will get a tax exemption of Rs 80,000. These changes are scheduled for the financial year 2025-26, which corresponds to the assessment year 2026-27. Additionally, the budget for 2025-26 proposes to extend the time limit for filing updated income tax returns from the current two years to four years. In addition, the budget includes a plan to double the limit of tax deduction on interest income for senior citizens to Rs 1 lakh. The government also suggested revisions in income tax slabs and rates. According to Sitharaman, the new tax structure will have no tax on income up to Rs 4 lakh, 5% tax on income between Rs 4 lakh 1 to 8 lakh, 10% tax on income between Rs 8 lakh 1 to 12 lakh, 15% tax on income between Rs 12 lakh 1 to 16 lakh, 20% tax on income between Rs 16 lakh 1 to 20 lakh, 25% tax on income between Rs 20 lakh 1 to 24 lakh, and 30% tax on income above Rs 24 lakhThe government is planning to simplify the tax deduction at source (TDS) system by cutting down the number of rates and thresholds, making it easier for taxpayers. The limit for tax collection at source (TCS) on money sent abroad under the Liberalised Remittance Scheme (LRS) has been raised from Rs 7 lakh to Rs 10 lakh. Additionally, the TDS limit for rent payments has been raised to Rs 6 lakh, bringing some relief to people and businesses earning rental income. In terms of education loans, the budget suggests abolishing TCS on loans up to Rs 10 lakh from certain financial institutions, which will help students and their families navigate the process more smoothly. The government has reduced the tax burden on citizens from time to time. After 2014, the zero tax limit was raised from Rs 2.5 lakh to Rs 5 lakh in 2019 and then to Rs 7 lakh in 2023. Additionally, under the new tax system, individuals with income up to Rs 12 lakh will not have to pay any income tax.
However, this does not apply to capital gains and similar income. The benefits of the revised income tax slabs and rates can be summarized thus: Taxpayers earning Rs 12 lakh will have their tax liability reduced to zero, saving them Rs 80,000. Those with an income of Rs 16 lakh will benefit by Rs 50,000. Taxpayers earning Rs 18 lakh will save Rs 70,000. Individuals earning Rs 20 lakh will benefit by Rs 90,000. Taxpayers with an income of Rs 25 lakh will get a benefit of Rs 1,10,000. Those earning Rs 50 lakh will also get a benefit of Rs 110,000. The minimum income limit for tax deduction at source (TDS) has been increased in the Union Budget 2025-26. The limit of TDS on interest income for senior citizens has been raised from Rs 50,000 to Rs 1 lakh per annum. The minimum income limit for TDS on rental income has been raised from Rs 2.40 lakh to Rs 6 lakh per annum. Also, under the Reserve Bank's liberalized remittance scheme (LRS) for sending money abroad, TCS will now be applicable on amounts exceeding Rs 10 lakh instead of Rs 6 lakh.
The Union Budget 2025 comes at a crucial time when India's economic growth has fallen to its lowest level in four years. Global uncertainties, including US tariff threats and rising geopolitical tensions, are creating new challenges. In response, the budget outlines a plan to strengthen the economy, with an emphasis on tax breaks, infrastructure development, and reforms across various sectors. By introducing significant income tax cuts, increasing exemptions, and providing new incentives for startups and small businesses, the government hopes to raise middle-class incomes and boost sustainable growth in the long run.

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