New Income Tax Slabs in Budget 2025 Highlights: Govt to introduce new income tax bill next week, says Sitharaman

Addressing a press conference in Delhi, Union Finance Minister Nirmala Sitharaman says, “Responding to voice of the people, which is what PM Modi is known for, it is a very responsive government, and as a result, the income tax simplification which I announced in July is already completed in its works and we shall bring the bill next week. So, the income tax simplification about which I had gone in detail in July budget… it will be brought to the Parliament next week.”

“In this Budget, income of up to Rs 12 lakh has been exempted from tax. Tax has been reduced for people of all income groups. Middle class will benefit a lot from this… Similarly, those who have recently got jobs, this tax exemption will become a big opportunity for them…” says PM Modi.

Vinit Sambre, Head – Equities, DSP Mutual Fund says,

“The budget has shifted the focus from relying primarily on government investment as the key driver of growth to a more balanced approach that promotes consumption and private sector investment. While the government’s planned capital expenditure is moderate, which may seem concerning at first glance, maintaining focus on execution should yield positive outcomes.

Various measures aimed at improving the ease of doing business—such as simplifying regulations and promoting the “Make in India” initiative—should eventually stimulate private investment. Additionally, putting more money into the hands of individuals through tax savings is expected to benefit consumer-oriented businesses.

Achieving these objectives while maintaining fiscal prudence is commendable. The government has adhered to its fiscal consolidation path, which should help keep interest rates stable and conducive to economic growth.”

Deepak Ramaraju, Senior Fund Manager, Shriram AMC says,

“The union budget for FY 25-26 has focused more on consumption lead economic growth form equity market expectations. The cut in personal income tax may translate into higher discretionary spending and hence sectors like Auto, Consumer Durables, Retail, Travel & Tourism and selected FMCG companies may outperform the broader markets. Focus on improving crop diversification, innovation, improve irrigation and favorable credit schemes for farmers may be positive for farm equipment, tractors, fertilizer etc.

Though the budget did not add any negativity to the capital gains, the markets may remain buoyant for the medium term. Cutting personal taxes may lead to higher savings, which might result in increased SIP flows, potentially supporting the markets further. Capital market-related sectors such as AMCs, and brokerage houses may expect higher retail participation.

Overall, the fiscal deficit is pegged at 4.4% of GDP ensuring the fiscal prudence of the government. The finance minister has tried to do a balancing act. The demand side of the economy is supported especially the agriculture, manufacturing and SMEs are provided with supportive measures, not much tweaks to custom duties and boost to exports. This should support employment and consumption which has taken a back seat in the last 2 quarters. The rural demand may marginally improve further. The capex spending is kept at 11.2 Lakh crores, indicating the intention of the government to continue to spend.

Sectors such as Defense and Railways may stay muted on cutting down of expenditure as well as Oil and Gas and PSU on lack of any positive announcement.”

Siddharth Bhamre Head of Research- Asit C Mehta Investment Interrmediates says, “The highlight and headlines for this budget definitely will be the tax benefits to the middle class. This will certainly boost by consumption which augurs well for sectors like FMCG, Paints, Auto, etc. However, one should look beyond these measures to see the big picture.

This budget gives a glimpse of nation-building. The way FM has structured and presented this budget is out of the economics textbooks. The focus is not just on giving immediate reliefs but also on providing skill set, platform and capital for sustainable growth. It’s like “Give a man a fish, and you will feed him for a day; teach a man how to fish and you feed him for a lifetime”. In short, Aatmanirbhar

Focus on sectors like agriculture, power, labor-intensive industries, and capital availability for MSMEs was much needed. Also, attention towards urban development has come at a time when urban growth has been slowing down.

This budget is providing immediate relief to tax payers to boost consumption and at the same time taking steps to achieve long term goals by host of reforms which may not appear big-ticket but will create a momentum that may thrive on its own over a period of time.”

The Viksit Bharat Budget 2025 reflects our government’s commitment to fulfilling the aspirations of 140 crore Indians, says Prime Minister Narendra Modi after presentation of Union Budget 2025-26.

Sitharaman announced rationalisation of TDS (Tax Deduction at Source) regime to ease compliance burden.

Presenting the Budget for 2025-26, she said tax proposals are guided by income tax reforms for middle class, TDS rationalisation, and easing compliance burden.

The government will also be introducing a new Income Tax (I-T) bill in Parliament next week.

Following are the revised slabs and rates under new tax regime announced in the FY26 Budget –

-Income up to Rs 4 lakh (per annum) —– Nil

-Between Rs 4 and 8 lakh —————- 5 per cent (tax)

-Between Rs 8 and 12 lakh ————— 10 per cent

-Between Rs 12 and 16 lakh ————– 15 per cent

-Between Rs 16 and 20 lakh ————— 20 per cent

-Between Rs 20 and 24 lakh ————– 25 per cent

-Above Rs 24 lakh ————————- 30 per cent

* Nil tax slab will apply for annual income up to Rs 12 lakh (Rs 12.75 lakh for salaried tax payers with standard deduction of Rs 75,000) under new tax regime.

As per the rejig, for people earning more than Rs 12 lakh per annum, there will be nil tax for income up to Rs 4 lakh, 5 per cent for income between Rs 4 and 8 lakh, 10 per cent for Rs 8-12 lakh, 15 per cent for Rs 12-16 lakh.

A 20 per cent income tax will be levied on income between Rs 16 and 20 lakh, 25 per cent on Rs 20-24 lakh and 30 per cent above Rs 24 lakh per annum.

A tax payer in the new regime with an income of Rs 12 lakh will get a benefit of Rs 80,000 in tax. A person having income of Rs 18 lakh will get a benefit of Rs 70,000 in tax.

A person with an income of Rs 25 lakh gets a benefit of Rs 1.10 lakh.

“I am now happy to announce that there will be no income tax payable up to income of Rs 12 lakh (i.e. average income of Rs 1 lakh per month other than special rate income such as capital gains) under the new regime.

“The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment,” Sitharaman said in her Budget speech.

Individuals earning up to Rs 12 lakh annually will be exempt from paying income tax under the revised tax regime, as Finance Minister Nirmala Sitharaman offered relief to the middle class on Saturday by raising the exemption limit and adjusting tax slabs.

For salaried employees, the tax-free threshold will be Rs 12.75 lakh per year, factoring in a standard deduction of Rs 75,000. The new tax regime also includes higher exemptions and further adjustments to benefit taxpayers.

The Union Budget 2025 takes a commendable step toward tax simplification and easing the financial burden on taxpayers. The increase in the income tax exemption limit to Rs 12 lakh will provide significant relief to the middle class, boosting disposable income and fostering savings and investments. Additionally, the revised tax slabs and reduced compliance burden for businesses will enhance financial planning and encourage voluntary compliance, says Soumya Sarkar, Co-Founder, Wealth Redefine.

Following are the revised slabs and rates under new tax regime announced in the FY26 Budget:

Income up to Rs 4 lakh (per annum) – Nil

Between Rs 4 and 8 lakh – 5%

Between Rs 8 and 12 lakh – 10 per cent

Between Rs 12 and 16 lakh – 15 per cent

Between Rs16 and 20 lakh – 20 per cent

Between Rs 20 and 24 lakh – 25 per cent

Above Rs 24 lakh – 30 per cent

Nil tax slab will apply for annual income up to Rs 12 lakh (Rs 12.75 lakh for salaried tax payers with standard deduction of Rs 75,000) under new tax regime.

Finance Minister Nirmala Sitharaman has announced rationalisation of TDS (Tax Deduction at Source) regime to ease compliance burden.

She said tax proposals are guided by income tax reforms for middle class, TDS rationalisation, and easing compliance burden.

New Income Tax Slabs announced

0-4 lakh – Nil Tax

4 -8 lakh – 5%

8-12 lakh – 10%

12-16 lakh – 15%

16-20 lakh – 20%

20 to 24 lakh – 25%

Income above 20 lakh – 30%

Individuals earning Rs 12 lakh per annum will not pay any tax now under the new tax regime, FM Sitharaman announced in Budget 2025.

TDS, TCS to be rationalised by reducing number of rates and thresholds, Finance minister announced in the budget.

New Income Tax Bill to carry forward ‘Nyay’ as principle as the existing Income Tax Act: FM

Up to Rs 3 lakh – NIL

Rs 3 lakh – Rs 7 lakh – 5%

Rs 7 lakh – Rs 10 lakh – 10%

Rs 10 lakh – Rs 12 lakh – 15%

Rs 12 lakh – Rs 15 lakh – 20%

Above Rs 15 lakh – 30%

The government has announced new Income Tax Bill in the Union Budget 2025 in Parliament. The bill will be presented next week in Parliament.

Taxpayers are hopeful that Budget 2025 will address these concerns and provide more comprehensive relief under Section 80D.

Section 80D of the Income Tax Act offers deductions for premiums paid on medical insurance policies or contributions to government health schemes for the taxpayer, their spouse, children, and parents. Currently, senior citizens (aged above 60) who are not covered by health insurance are allowed a deduction of up to Rs. 50,000 for actual medical expenses.

However, there is growing demand for an increase in this limit, as well as an extension of these benefits to individuals other than senior citizens, particularly in light of rising healthcare costs.

Section 80C of the Income Tax Act allows taxpayers to claim deductions on various investment-linked tax-saving options such as life insurance premiums, ELSS, PPF contributions, and home loan principal repayments, among others. However, the current limit of Rs. 1.5 lakh has remained unchanged since 2014, despite the growing number of investment options and increasing financial pressures. Taxpayers have been advocating for an increase in this limit to Rs. 2.5 lakh or more for the past 5-7 years. With the upcoming Budget, there is strong anticipation that the government may consider this long-awaited amendment, providing greater tax relief to individuals.

Currently, individuals have the option to choose between two tax regimes: the old regime and the concessional new regime. The new tax regime offers a reduced tax rate on income, but only if the taxpayer forgoes certain exemptions and deductions. In contrast, the old regime allows taxpayers to claim various exemptions and deductions, resulting in a more complex but potentially beneficial tax structure. Both regimes have their pros and cons, and there is growing speculation that the upcoming Budget may introduce measures to simplify and possibly converge these regimes, making the tax system more streamlined and taxpayer-friendly.

Finance Minister Nirmala Sitharaman proposed limit increase for interest subvention scheme for Kisan Credit Card from Rs 3 lakh to Rs 5 lakh.

The rationalization of income tax laws is long overdue. While some efforts were made with the introduction of the Direct Tax Code, progress has been slow. It seems that the focus now is on addressing issues within the existing framework rather than introducing a new code. Among the areas that require attention, one key fix that could benefit taxpayers is the rationalization of TDS (Tax Deducted at Source) obligations. Multiple provisions in the current TDS sections are causing confusion and issues for taxpayers. Simplifying and standardizing the rates and provisions, especially in relation to litigious matters, could provide much-needed clarity and certainty for taxpayers.

FM Sitharaman in Union Budget 2025 has proposed hike in loan amount under New Kisan Scheme to Rs 5 lakh from Rs 3 lakh.

Will Budget 2025 bring changes to AIF taxation?

Budget 2025 could significantly enhance investor confidence and operational efficiency for Alternative Investment Funds (AIFs). Investors are hoping that the upcoming Budget will ensure that they are taxed on actual net income rather than gross pass-through income. Another highly anticipated move is the introduction of a pass-through regime for Category III AIFs. This would improve cash availability at the AIF level, potentially boosting the Internal Rate of Return (IRR) for the fund. Such a change could also expand the base for performance fee calculations and increase cash inflows for fund managers.

Budget 2025: As the insurance sector continues to innovate with new products, meet customer expectations, and adopt more sophisticated risk management practices, it is crucial for policymakers to create a robust and conducive environment. This will not only safeguard the interests of policyholders but also empower insurers to scale up their operations. A supportive framework could enable insurers to extend their reach, especially to the most underserved segments of the population, fostering inclusivity and greater financial security.

The Direct Tax Code (DTC) is expected to introduce several key changes in the upcoming budget. These include shifting from the financial year to the calendar year for tax purposes, simplifying the residential status for individuals by eliminating complex categories like ‘Resident but not Ordinary Resident’, and introducing unified tax rates for both domestic and foreign companies.

There is also an expectation to expand the tax base for withholding taxes, along with further rationalizing withholding tax rates and provisions. These changes aim to streamline tax processes and enhance tax compliance.