Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2025, on Saturday (February 1) said that the rebate on income tax under the New Tax Regime will be such that those with annual income of up to Rs 12 lakh will have zero income tax liability.
Social media quickly reacted to the announcement, with a mix of responses. Some users hailed it as a ‘brave move’ and a ‘major relief for the middle class,’ while others expressed criticism and shared negative views.
A user wrote, “A BIG RELIEF FOR MIDDLE CLASS wooow i will buy car NO INCOME TAX payable on income up to Rs 12 lakh under the new regime!!”.
“If one earns 12.75 lakhs, then no tax for him/her. But if someone makes 12.76 lakhs, he/she will pay 60k in tax. Complicating like caramel popcorn at 18% GST. The experts are saying 15-20 lpa bracket is the one driving consumption but they haven’t gotten substantial reduction,” a X user said in a post.
Here are the new income tax slabs
- Rs 0-4 lakh — Nil
- Rs 4-8 lakh — 5%
- Rs 8-12 lakh — 10%
- Rs 12-16 lakh — 15%
- Rs 16-20 lakh — 20%
- Rs 20-24 lakh: 25%
- Above Rs 24 lakh — 30%
What does it mean?
Under the new tax regime for FY 2025-26, the nil tax slab will apply to annual incomes up to Rs 12 lakh (Rs 12.75 lakh for salaried individuals with a standard deduction of Rs 75,000). For instance, an individual earning Rs 13 lakh annually in FY 2024-25 will incur a tax liability of approximately Rs 78,090.
Here’s how the tax is calculated: 5% tax on income between Rs 4-8 lakh (after applying the Rs 75,000 standard deduction), which amounts to Rs 16,250. 10% tax on income in the Rs 8-12 lakh range, totaling Rs 40,000. 15% tax on the Rs 12-13 lakh income bracket, adding Rs 15,000.
Additionally, a 4% cess on the total tax brings in Rs 2,850. Thus, the total tax liability for this individual stands at Rs 74,100.
Govt also proposes hike in threshold for TDS on rent
The government also proposed raising the annual threshold for tax deduction at source (TDS) on rent to Rs 6 lakh, up from the current limit of Rs 2.4 lakh. “I propose to rationalise Tax Deduction at Source (TDS) by reducing the number of rates and thresholds above which TDS is deducted. Further, threshold amounts for tax deduction will be increased for better clarity and uniformity,” FM Sitharaman said in her Budget speech. She announced that the “annual limit of Rs 2.40 lakh for TDS on rent is being increased to Rs 6 lakh”.