In a landmark announcement during the Union Budget 2025-26, Finance Minister Nirmala Sitharaman unveiled a major relief measure for the middle class, declaring that individuals earning up to Rs 12 lakh annually will not be required to pay income tax. This move is expected to benefit millions of taxpayers, providing them with more disposable income and boosting consumer spending.

The new tax slab introduces significant changes to the existing income tax structure:

No Income Tax for Earnings Up to Rs 12 Lakh: Individuals with an annual income of up to Rs 12 lakh will be exempt from paying income tax, up from the previous threshold of Rs 7 lakh under the new tax regime.
Simplified Tax Regime: The government has further streamlined the tax regime, reducing the number of tax slabs and making it easier for taxpayers to understand and comply with the system.
Increased Standard Deduction: The standard deduction has been raised to Rs 1 lakh, providing additional relief to salaried individuals and pensioners.

This tax relief is expected to have a far-reaching impact on the middle class, which has been grappling with rising inflation and economic uncertainties. By increasing the tax exemption limit, the government aims to:

Boost Disposable Income: With more money in hand, individuals are likely to increase spending on goods and services, stimulating economic growth.
Encourage Savings and Investments: The additional income could also lead to higher savings and investments, contributing to long-term financial stability.
Reduce Financial Stress: The move will alleviate financial pressure on middle-income families, allowing them to allocate resources to education, healthcare, and other essential needs.

FM Sitharaman emphasized that the tax relief measures are part of the government’s broader strategy to drive economic growth and ensure inclusive development. By putting more money in the hands of the middle class, the government aims to create a ripple effect that benefits various sectors of the economy, including retail, real estate, and automotive.

The announcement has been widely welcomed by economists and industry leaders, who see it as a positive step towards reviving consumer confidence and demand. However, some experts have cautioned that the government will need to balance the tax relief with measures to increase revenue, such as broadening the tax base and improving compliance.

The new tax regime is expected to come into effect from April 1, 2025, and taxpayers will have the option to choose between the old and new tax structures. The government has also announced plans to launch a nationwide awareness campaign to educate taxpayers about the changes and help them make informed decisions.

Key Highlights:

• No Income Tax for Earnings Up to Rs 12 Lakh: FM Sitharaman announced a major tax relief for the middle class in Budget 2025.
• Simplified Tax Regime: The new tax structure reduces the number of slabs and increases the standard deduction to Rs 1 lakh.
• Boost to Disposable Income: The move aims to stimulate consumer spending, savings, and investments.
• Effective from April 2025: Taxpayers can choose between the old and new tax regimes.