New Delhi: Under the Union Budget 2025 policy changes the government offers a positive relief to tax payers below ₹12 lakh annual income who will not need to file income tax returns. The latest tax-free threshold increased massively from ₹7 lakh to ₹12 lakh which will benefit a vast number of middle-income working people.
Income Tax-Free up to ₹12 Lakh:
- No Taxable Earnings on ₹12 Lakh!
The government has expanded the amount of income which does not require taxation from ₹7 lakh to ₹12 lakh. People whose annual income stays under ₹12 lakh will not have to pay any taxes. Before the tax application began at ₹7 lakh for taxpayers but the recent relief provides broader coverage.
- How Tax is Calculated for ₹12 Lakh Income
Here’s how tax is structured under the new system:
Nil tax for the first ₹4 lakh
5% tax on ₹4-8 lakh income = ₹20,000
10% tax on ₹8-12 lakh income = ₹40,000
Total tax amounts to ₹60,000, but rebates and deductions wipe out this amount, thus zero tax for those who earn up to ₹12 lakh!
- Salaried Employees Get Extra Advantage Over Others
Salaried Workers Acquire Additional Tax Disadvantages Compared to Other Workers
The salary earners can take advantage of standard deductions worth ₹75,000. People whose taxable income reaches ₹12.75 lakh will not need to pay taxes because this amount is tax-exempt.
- What happens if you earn more than ₹12 Lakh?
For people earning above ₹12 lakh, new tax slabs are applicable:
15% on income between ₹12 lakh and ₹16 lakh.
20% on income between ₹16 lakh and ₹20 lakh.
25% on income between ₹20 lakh and ₹24 lakh.
30% of income above ₹24 lakh.
Surcharges on Higher Earning Individuals
Now, even if you are making a bit over ₹12 lakh, you’ll pay less than you did.
- On ₹18 lakh, one can save ₹70,000 over the previous taxation.
- On ₹25 lakh, the saving would be about ₹1.1 lakh.
Old vs. New Tax Regime
The old tax system is the same, where only income up to ₹2.5 lakh is tax-free. The new system is simpler and more beneficial for middle-class taxpayers.
Why This Change?
The government wants to increase consumer cash flow which will stimulate both consumption and investment activities. The direct tax bill introduction is part of their plans to make tax laws easier to understand and minimize disagreements.
This is the biggest tax relief in recently and will make middle-class families save more.
