PC: The Financial Express
Major Relief for Middle-Class Taxpayers
Union Finance Minister Nirmala Sitharaman and her Union Budget 2025-26 have announced a complete overhaul of the income tax structure under the new tax regime-from income earned not under any new tax regime to null in the case of income Rs 12 lakh to relieve middle-class taxpayers so that they will be able to save and invest more.
The government has once again restated its commitment to the three foundation pillars of Democracy, Demography, and Demand and their vital importance in shaping the economic and social landscape in India. This commitment translates into the recognition of the middle class as one of the most important drivers of this economy, being its highest contributor to consumption, investment, and entrepreneurship.
Union Finance Minister Nirmala Sitharaman argued that the Modi government since 2014 has continuously put its best foot forward to ease the tax load of middle-income groups and enhance their disposable income. She also elaborated about the progressive reforms in the last 10 years in the form of income tax alleviation.
Since 2014, the government has systematically raised the tax exemption threshold to afford more middle-class taxpayers the benefit of lesser tax liabilities. The limit which, in 2014, was at Rs 2.5 lakh has increased and will continue so. By 2025, it would have reached Rs 12 lakh-which in effect will expand the benefit extended to salaried taxpayers and small business owners.
These steps dovetail with the envisaged larger economic policy of the government that can boost domestic consumption, savings, and investments and promote financial stability for the middle-income group. With these reforms yet again, the administration intends to bring about a more inclusive and growth-oriented economy further, reiterating the utmost significance of the middle class in India’s development journey.
Revised Income Tax Slabs for FY 2025-26
Under the new tax regime, effective from Assessment Year 2026-27, the revised income tax slabs are as follows:
| Income Slab (Rs) | Tax Rate |
| 0-4 Lakh | Nil |
| 4-8 Lakh | 5% |
| 8-12 Lakh | 10% |
| 12-16 Lakh | 15% |
| 16-20 Lakh | 20% |
| 20-24 Lakh | 25% |
| Above 24 Lakh | 30% |
For salaried people, a deduction of Rs 75,000 raises the exemption threshold to Rs 12.75 lakh. These changes might boost household spending and savings and, thus, further push growth in the economy.
Old Tax Regime Slabs Remain Unchanged
The old tax regime will continue with the existing tax structure:
– Income up to Rs 2.5 lakh – Nil
– Rs 2.5 lakh – Rs 5 lakh – 5%
– Rs 5 lakh – Rs 10 lakh – 20%
– Income above Rs 10 lakh – 30%
This rebate under Section 87A continues to exempt taxpayers from tax liability for incomes up to Rs 12 lakh in the new tax regime.
Tax Savings for Different Income Levels
The revised slabs provide substantial tax relief, particularly to the middle class. Estimated tax savings include:
– Rs 12 lakh income – Rs 80,000 saved (complete tax exemption)
– Rs 18 lakh income – Rs 70,000 saved (30% tax reduction)
– Rs 25 lakh income – Rs 1,10,000 saved (25% tax reduction)
These modifications are consistent with the vision of Viksit Bharat held by the government, creating confidence in the taxpayers while encouraging them to participate in economic activities.
Tax reforms in Union Budget 2025-26 assumed a historic manifestation, tremendously benefitting individual establishments towards the enhancement of economic growth.
