Finance Minister Nirmala Sitharaman took the spotlight during the Union Budget 2025 presentation. And boy, did she love saying “middle class”. It’s safe to say that the middle class was probably mentioned more times in her speech than in any Bollywood song lyrics. The term “middle class” made a grand entrance – drumroll, please – at least seven times!
Now, before you think the FM was simply talking to the masses with a bunch of ‘middle-class’ references, let’s talk about the surprise that had the salaried and middle-class taxpayers collectively gasping in relief. Remember last year’s budget when the opposition heavily criticized it for being far too friendly toward the ultra-rich and leaving the middle class high and dry? Well, the critics may have been right. Many were disappointed, especially after the lack of significant relief for the salaried and middle-income groups.
But Budget 2025 is a whole new story. The FM towards the end of her speech rolled out a surprise package that’s got the middle class talking. The finance minister announced that under the new tax regime, no tax will be levied on incomes up to Rs 12 lakh. And for salaried individuals, the upper limit goes up to Rs 12.75 lakh thanks to the standard deduction of Rs 75,000.
To help you keep a score, this is a significant jump from previous years. The government raised the tax-free income slab to Rs 5 lakh in 2019, and then to Rs 7 lakh in 2023. The FM, it seems, has gone all-in for the middle class this time. For the first time, taxpayers in this range will pay zero tax if their annual income is up to Rs 12 lakh.
The revamped tax structure also changes the rates across various income slabs, which could mean less tax for many middle-class households. The new rates make things look even better with cuts ranging from 5% for incomes between Rs 4-8 lakh to 30% for incomes above Rs 24 lakh.
And let’s not forget about the bonus – a rebate that will ensure that those earning up to Rs 12 lakh (excluding special rate income) will face no tax liability. The Government is trying to appease the middle class with the surprise budget 2025 announcement and while there may be multiple reasons why that is, one probability is that it has eyes and ears set on the upcoming state elections in Delhi and Bihar, to not just win, but win by a big margin.