The Union Budget 2025-26 has brought major tax relief for salaried individuals and the middle class. Finance Minister Nirmala Sitharaman announced a new income tax structure under which income up to ₹12 lakh will be tax-free under the new tax regime. Salaried taxpayers will get an additional ₹75,000 standard deduction, making their effective tax-free income ₹12.75 lakh.
This reform aims to reduce the financial burden on middle-income taxpayers, boost household savings, and encourage economic growth.
Key Announcements in the New Tax Regime
The revised tax structure includes:
✅ Zero tax for annual income up to ₹12 lakh (₹12.75 lakh for salaried taxpayers with standard deduction).
✅ Lower tax rates across different income slabs to ensure fair taxation.
✅ Encouragement for savings and investments to improve financial security.
✅ A simplified tax system to enhance compliance and ease of filing returns.
New Income Tax Slabs and Rates for FY 2025-26
| Annual Income (₹) | New 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% |
This new structure reduces tax liability and puts more money into the hands of taxpayers.
Impact on Middle-Class Taxpayers
1. Increased Disposable Income
The increase in the tax-free limit from ₹5 lakh to ₹12 lakh will allow taxpayers to save more and spend more. A salaried individual earning ₹12.75 lakh per year will pay no tax, benefiting from the ₹75,000 standard deduction.
This reform boosts household consumption, leading to growth in retail, real estate, and automobile sectors.
2. Encouragement for Savings and Investments
With lower tax rates, individuals can save and invest more in:
✔ Fixed deposits and savings accounts
✔ Mutual funds and stocks
✔ Retirement and pension schemes
✔ Insurance and tax-saving instruments
Higher savings will improve financial security and promote long-term wealth creation.
3. Boost to Economic Growth
The tax reduction ensures that middle-class families spend more on goods and services, benefiting industries like:
📌 Retail and e-commerce
📌 Automobiles
📌 Travel and hospitality
📌 Healthcare and education
More spending creates demand, leading to higher economic growth and job creation.
Simplified Tax Filing Process
The new tax regime simplifies the filing process by:
🔹 Reducing the number of tax slabs for easier calculations
🔹 Encouraging digital tax filing through automation
🔹 Introducing faster tax refund mechanisms
This move will increase voluntary tax compliance and reduce tax evasion.
Comparison with Previous Tax Regime
| Aspect | Previous Tax Regime | New Tax Regime 2025-26 |
|---|---|---|
| Zero-Tax Slab | ₹5 lakh | ₹12 lakh (₹12.75 lakh for salaried taxpayers) |
| Lowest Tax Rate | 5% for ₹2.5L-5L | 5% for ₹4L-8L |
| Middle Tax Rate | 20% on ₹5L-10L | 10% on ₹8L-12L |
| Highest Tax Rate | 30% on ₹10L+ | 30% on ₹24L+ |
The new tax regime lowers the tax burden across all income levels while maintaining progressive taxation.
Reactions from Taxpayers and Experts
📢 Economists believe this move will increase disposable income, leading to higher investments and spending.
📢 Salaried professionals welcome the zero-tax benefit up to ₹12 lakh, calling it a game-changer for middle-class families.
📢 Industry leaders see this as a growth-oriented budget, encouraging investment and economic expansion.
Conclusion: A Pro-Taxpayer Budget
The Union Budget 2025-26 introduces progressive tax reforms, ensuring higher savings, increased spending, and economic stability. By raising the tax-free limit, lowering tax rates, and simplifying compliance, the government has empowered taxpayers and boosted financial confidence.
This historic tax reform will benefit millions of Indians, helping the nation move toward stronger financial security and sustained economic growth.
