On February 1, 2025, Finance Minister Nirmala Sitharaman unveiled the Union Budget 2025, which included several significant income tax adjustments targeted primarily at the middle class. The goal of these measures is to reduce the cost of compliance and streamline the tax system.
“With about half of the current law’s chapters and words, the new measure will be straightforward to read. In her budget address, the FM stated, “It will be easy for taxpayers and tax administration to understand, resulting in tax certainty and less litigation.”
1. Tax-Free Income Up To Rs 12 Lakh
Up to Rs 12 lakh in income, there would be no tax due under the new tax system. The effective income limit for the salaried class is Rs 12.75 lakh after the required deduction of Rs 75,000.
2. Updated Income Tax Slabs
Under the new regime, the government has suggested changes to the tax slabs.
- 0-4 lakh rupees: Nil
- 4-8 lakh rupees: 5%
- 8-12 lakh rupees: 10%
- 12-16 lakh rupees: 15%
- 16-20 lakh rupees: 20%
- 20-24 lakh rupees: 25%
- Above 24 lakh rupees: 30%
By improving their disposable income and increasing their levels of spending, this new tax system seeks to lessen the financial burden on the middle class.
3. Tax Relief For Senior Citizens
The tax deduction for interest for seniors has been raised from Rs 50,000 to Rs 1,00,000 in the Budget 2025. Retirees would save more money as a result of this.
4. Updated Tax Return Filing Extension
To provide taxpayers more time to easily state their correct income, the Union Budget 2025 has extended the deadline for filing updated income tax returns from the existing two years to four years.
5. Tax Exemption For Withdrawals From NSS
On or after August 29, 2024, withdrawals from the National Pension Scheme (NPS) will not be subject to taxes.