There will be no income tax payable for earnings up to Rs 12 lakh under the new tax regime, Union Finance Minister Nirmala Sitharaman announced on Saturday while presenting the Union Budget 2025. Including the standard deduction of Rs 75,000, the tax-free limit rises to Rs 12.75 lakh. New tax structure, The budget proposes revised slabs and rates, which Sitharaman said would reduce the tax burden on the middle class, allowing for greater disposable income. Tax rates under the new regime:
Rs 0 - Rs 4 lakh: Nil Rs 4 - Rs 8 lakh: 5%
Rs 8 - Rs 12 lakh: 10%
Rs 12 - Rs 16 lakh: 15%
Rs 16 - Rs 20 lakh: 20%
Rs 20 - Rs 24 lakh: 25%
Above Rs 24 lakh: 30%
The revised rates apply to regular income sources such as salaries, pensions and bank deposits. Capital gains, which are taxed separately, do not fall under this structure.
Expected tax savings
An analysis by EY India shows how much salaried individuals will save under the new tax regime, assuming only the standard deduction of Rs 75,000 is claimed.
Gross taxable income: Rs 12.75 lakh
Current tax payable: Rs 83,200
Proposed tax payable: Rs 0
Tax saved: Rs 83,200
Gross taxable income: Rs 15 lakh
Current tax payable: Rs 1,30,000
Proposed tax payable: Rs 97,500
Tax saved: Rs 32,500
Gross taxable income: Rs 16 lakh
Current tax payable: Rs 1,53,400
Proposed tax payable: Rs 1,13,100
Tax saved: Rs 40,300
Gross taxable income: Rs 20 lakh
Current tax payable: Rs 2,78,200
Proposed tax payable: Rs 1,92,400
Tax saved: Rs 85,800
Gross taxable income: Rs 24.75 lakh
Current tax payable: Rs 4,26,400
Proposed tax payable: Rs 3,12,000
Tax saved: Rs 1,14,400
Gross taxable income: Rs 25 lakh
Current tax payable: Rs 4,34,200
Proposed tax payable: Rs 3,19,800
Tax saved: Rs 1,14,400
Push for new tax regime
EY India’s analysis indicates that taxpayers opting for the new tax regime in FY 2024-25 will benefit further in FY 2025-26 due to the revised slabs. Shalini Jain, tax partner at EY India, said the government’s decision to adjust the new regime while leaving the old structure unchanged suggests a clear push towards wider adoption. “Budget 2025 has made significant changes to income tax slabs under the new tax regime while keeping the tax slabs unchanged in the old tax regime. This demonstrates that the government wants to encourage wider adoption of the new tax regime to ease the burden on both the taxpayers and the income tax authorities,” she said. She added that salaried individuals with a net taxable income of Rs 12 lakh will now pay no tax due to the enhanced rebate. Even those in the highest tax bracket stand to save Rs 1,14,400. According to EY, around 72% of taxpayers opted for the new regime in FY 2023-24. With the latest changes, that number is expected to rise further.
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