India's Union Budget 2025-26: Major Revisions to Income Tax Structure
Kashif Azeem 16 Feb 2025
In the Union Budget 2025-26, Finance Minister Nirmala Sitharaman made an impactful announcement regarding the revision of India’s income tax structure under the new tax regime. These changes are designed to offer significant relief to taxpayers while also stimulating economic growth across the country.
Key Highlights of the Income Tax Revisions:
1. Tax Exemption Threshold Increased
One of the most notable changes is the increase in the tax exemption threshold. Individuals earning an annual income of up to ₹12 lakh will now be exempt from paying income tax. This change promises to benefit a large section of the Indian population by reducing the financial burden on middle-income earners.
2. Standard Deduction Enhanced
The standard deduction for salaried employees has been raised to ₹75,000. This enhancement effectively makes income up to ₹12.75 lakh tax-free, providing more disposable income for individuals, which could translate into increased consumer spending and savings.
3. Revised Tax Slabs
For individuals earning more than ₹12.75 lakh, the new tax rates have been revised to be more progressive and taxpayer-friendly. The detailed breakdown of the new tax slabs offers a more equitable distribution of tax burdens across income groups.
| Annual Income Range | Tax Rate |
|---|---|
| Up to Rs.4 Lakh | Nil |
| Rs 4 Lakh - Rs 8 Lakh | 5% |
| Rs 8 Lakh - Rs 12 Lakh | 10% |
| Rs 12 Lakh - Rs 16 Lakh | 15% |
| Rs 16 Lakh - Rs 20 Lakh | 20% |
| Rs 20 Lakh - Rs 24 Lakh | 25% |
| Above Rs 24 Lakh | 30% |
Simplifying the Tax System
These changes reflect the government’s commitment to simplifying India’s tax structure. With a focus on reducing the compliance burden, the new tax regime is now the default system. However, taxpayers still have the option to choose the old tax regime if it better aligns with their financial situation. This flexibility allows individuals to make decisions based on what works best for them.
Expected Impact on the Economy
The government anticipates that these reforms will lead to an increase in consumer spending and savings. Furthermore, the enhanced tax benefits are expected to encourage more investment, driving economic growth and supporting the overall development of the nation.
Conclusion
The income tax reforms in the Union Budget 2025-26 are a significant step towards boosting financial empowerment for individuals and contributing to India's economic growth. By providing relief to taxpayers and simplifying the tax system, the government is paving the way for a more prosperous and sustainable future.
