The Union Budget for 2025 has introduced significant changes to the income tax structure, particularly benefiting middle-class taxpayers. One of the most notable updates is the increase in the tax-free income threshold, which has been raised from ₹7 lakh to ₹12 lakh. This means that individuals earning up to ₹12 lakh annually will not have to pay any income tax, providing substantial relief to a large segment of the population.
Finance Minister Nirmala Sitharaman highlighted that this adjustment aims to enhance the disposable income of taxpayers, allowing them to spend more and stimulate economic growth. For those earning a monthly salary of up to ₹1 lakh, this change effectively eliminates their tax burden. However, incomes exceeding ₹12 lakh will be taxed according to the new slabs, which have also been revised to lower rates for higher earners.
For instance, an individual with an annual income of ₹15 lakh will now benefit from reduced tax rates compared to previous years. The new tax slab structure includes:
- Income up to ₹4 lakh: No tax
- Income from ₹4 lakh to ₹8 lakh: 5% tax
- Income from ₹8 lakh to ₹12 lakh: 10% tax
- Income from ₹12 lakh to ₹15 lakh: 15% tax
- Income from ₹15 lakh to ₹20 lakh: 20% tax
- Income from ₹20 lakh to ₹24 lakh: 25% tax
- Income above ₹24 lakh: 30% tax
These changes are expected to encourage more taxpayers to opt for the new tax regime, which is designed to be more straightforward than the old system that allowed numerous deductions and exemptions.
In addition, homeowners will benefit from changes regarding self-occupied properties. Previously, only one self-occupied house was exempt from taxation based on its notional rental value; now, both self-occupied homes can be exempted starting April 1, 2025. This adjustment is particularly advantageous for those owning multiple properties.
Senior citizens also stand to gain from the budget as the limit for tax deductions on interest income has been doubled from ₹50,000 to ₹1 lakh. This change aims to alleviate financial pressure on retirees and encourage savings.
Overall, these measures are seen as a strategic move by the government to bolster consumer spending and support economic growth amid rising inflation and living costs. The budget is expected to provide a significant boost not just for individual taxpayers but also for finance companies that may see increased activity as disposable incomes rise and consumer confidence improves.
