Union Budget 2025- Revised Income Tax Slabs Introduce 25% Rate for Rs 20-24 Lakh Incomes, 30% Tax Kicks In Above Rs 24 Lakh

The Union Budget 2025 has introduced significant changes to the income tax structure, providing much-needed relief for taxpayers across the country. The government has revised income tax slabs under the new regime to ensure that individuals keep more of their earnings. This move aims to stimulate domestic consumption, boost savings, and encourage investment, ultimately benefiting the economy.

Key Revisions to the Income Tax Slabs

Under the revised tax structure, taxpayers with annual earnings of up to Rs 12 lakh will be completely exempt from paying any tax, a move designed to offer immediate relief to middle-class earners. For those earning beyond Rs 12 lakh, the revised slabs bring substantial reductions in tax obligations, especially for those with incomes up to Rs 25 lakh.

Here is the breakdown of the revised income tax slabs:

Up to Rs 4,00,000: No tax

Rs 4,00,001 to Rs 8,00,000: 5% tax

Rs 8,00,001 to Rs 12,00,000: 10% tax

Rs 12,00,001 to Rs 16,00,000: 15% tax

Rs 16,00,001 to Rs 20,00,000: 20% tax

Rs 20,00,001 to Rs 24,00,000: 24% tax

Above Rs 24,00,001: 30% tax

These changes bring significant benefits, particularly for those with income between Rs 12 lakh and Rs 25 lakh, which makes up a large proportion of salaried taxpayers. The new structure offers a more progressive taxation system, wherein individuals earning more are taxed at higher rates, but the reductions for middle-income groups are clear.

How Taxpayers Up to Rs 25 Lakh Benefit

Let’s take a closer look at how individuals earning up to Rs 25 lakh benefit under the revised tax structure. For example, a person with an income of Rs 12 lakh will now pay no tax, thanks to the Rs 75,000 standard deduction. This is a major relief for individuals in this income bracket.

For someone earning Rs 13 lakh, the income is divided into different tax slabs. Here’s how the calculation breaks down:

No tax on the first Rs 4 lakh

5% tax on the next Rs 4 lakh (Rs 20,000)

10% tax on the next Rs 4 lakh (Rs 40,000)

15% tax on the remaining Rs 1 lakh (Rs 15,000)

This results in a total tax of Rs 75,000, which is much lower compared to the Rs 1 lakh tax in the previous regime. Thus, the taxpayer saves Rs 25,000 under the new tax slabs. For individuals with an income of Rs 18 lakh, the benefits are equally substantial. The new slabs ensure they will save approximately Rs 70,000 in taxes. This is an encouraging factor, especially when coupled with the additional Rs 75,000 standard deduction.

The Impact of These Changes in Union Budget

The government estimates a revenue foregone of Rs 1 lakh crore from direct taxes to accommodate these changes. Additionally, the reduction in tax collections due to the new slabs is expected to be around Rs 2,600 crore. While this may affect the overall tax revenues, the government hopes that the increased disposable income in the hands of individuals will help stimulate demand and drive economic growth.

Standard Deductions and Other Benefits

In addition to the tax slab revisions, the government has also made provisions for other deductions. Salaried taxpayers can claim a standard deduction of Rs 75,000 from their gross salary income. This, combined with the new tax slabs, offers substantial relief to those who previously found their tax liabilities burdensome.

The introduction of a 25% lower surcharge for incomes above Rs 2 crore is another beneficial measure that ensures high-income earners are not unduly burdened.

New Tax Regime Becomes Default

A significant change under the new tax regime is that it has now become the default taxation option. Previously, taxpayers had the option to choose between the old and new tax regimes. However, since April 1, 2023, taxpayers are automatically opted into the new regime, which offers lower rates but fewer exemptions. If individuals wish to continue under the old tax regime, they must explicitly opt for it while filing their tax returns.

Choosing Between the Old and New Regimes

For salaried individuals, the choice between the two tax regimes needs to be made every financial year during the filing of income tax returns. A taxpayer must select “No” for opting under Section 115BAC (new tax regime) in the ITR form if they wish to continue under the old regime. However, business owners have more complicated tax filing rules. While they can choose the tax regime, they must submit Form 10-IEA for switching, and once they opt for the new regime, they cannot return to the old one.

The revised income tax slabs in the Union Budget 2025 provide substantial relief for middle-class taxpayers, especially those earning between Rs 12 lakh and Rs 25 lakh. These changes will not only result in lower tax liabilities but also boost disposable incomes, encouraging greater domestic consumption, savings, and investment. The shift to a default new tax regime further streamlines the taxation process, though it leaves taxpayers with the option to choose the old regime if they prefer more exemptions. Ultimately, these revisions aim to create a more taxpayer-friendly system while driving economic growth.

Also Read – Lucky Block 2025 – Pioneering the Future of Decentralized Bitcoin Gambling