During the Union Budget 2025-2026, Finance Minister Nirmala Sitharaman made a huge announcement for income taxpayers including those up to ₹12 lakh annual income. This is a big welcome announcement for income taxpayers. This is this historic move of Budget in which people earning upto ₹12 lakh would not have to pay any income tax.
As per the Finance Minister, here are the new tax slabs:
- ₹0 to ₹4 Lakhs: Nil
- ₹4 Lakhs to ₹8 Lakhs: 5%
- ₹8 Lakhs to ₹12 Lakhs: 10%
- ₹12 Lakhs to ₹16 Lakhs: 15%
- ₹16 Lakhs to ₹20 Lakhs: 20%
- ₹20 Lakhs to ₹24 Lakhs: 25%
- Above ₹24 Lakhs: 30%
Sitharaman in her speech also said that people with a yearly income of up to ₹12 lakhs will get a rebate as well as a drop-down in tax slabs. The effect of this rebate would be to effectively remove the income tax that they would otherwise have to pay, and therefore the net tax would be zero.
For instance, people making ₹12 lakh annually used to pay ₹80,000 in tax. According to the new tax structure, this amount will however reduce down to ₹60,000 and applying the tax rebate, the net tax payable will be zero.
Sitharaman also noted that the taxpayers would continue to have the facility to opt for the old and new tax regimes. Under the old tax regime, housing rentals are exempt from tax along with insurance and other long term investment schemes and the latter was introduced in 2020 and carries lower rates but has no such exemptions.
This new structure is supposed to partially cut the tax burden on the middle-class taxpayers and reduce taxes on moderately earning people. The changes that are being undertaken by the government are aimed at making taxpayers, including those in the lower and middle income brackets, have more disposable income to drive economy.
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