Budget 2025 has ushered in several key initiatives, from AI-driven reforms, farmers' support, and hospitality sector growth to boosting MSMEs and women entrepreneurs. Finance Minister Nirmala Sitharaman has presented a forward-looking budget focused on empowering various sectors. However, the most significant highlight for taxpayers is the major relief provided in the form of an income tax exemption limit increase to ₹12 lakh, alongside a new set of revised income tax slabs.
Income Tax Exemption Limit Raised to ₹12 Lakh
In a substantial move aimed at providing relief to taxpayers, the government has raised the Income Tax Exemption Limit to ₹12 lakh in Budget 2025, offering a significant reprieve, especially for the middle class. This move marks a remarkable increase from ₹7 lakh in 2023, highlighting the government's commitment to reducing the tax burden and providing greater financial freedom to a larger section of the population.
Over the years, the government has progressively increased the income tax exemption limit, allowing taxpayers to retain more of their hard-earned money. Here’s a look at the historical growth of the income tax exemption limit:
2005: ₹1 lakh
2012: ₹2 lakh
2014: ₹2.5 lakh
2019: ₹5 lakh
2023: ₹7 lakh
2025: ₹12 lakh
This significant increase in the exemption limit underlines the government's efforts to reduce the tax burden, particularly for the middle class, ensuring that they can benefit from more disposable income to support their household expenses, savings, and investments.
New Revised Tax Slabs: Personal Income Tax Reforms Focused on Middle-Class Relief
The government’s overhaul of the personal income tax structure is another standout feature of Budget 2025. The newly revised tax slabs are designed to significantly reduce taxes for the middle class, providing a substantial boost to household consumption, savings, and investments.
Here’s a detailed look at the new tax slabs introduced for personal income tax:
0-4 lakh rupees: Nil (No Tax)
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%
The introduction of a ‘Nil Tax’ slab for incomes up to ₹12 lakh (₹12.75 lakh for salaried taxpayers with a standard deduction of ₹75,000) is a groundbreaking step that ensures that the middle class will bear significantly lower tax burdens, enabling them to enjoy greater financial freedom.