Major Relief for Middle Class: No Income Tax Up to Rs. 12 Lakh, Announced in Union Budget 2025

New Delhi: In a significant move aimed at easing the tax burden on the middle class, Finance Minister Nirmala Sitharaman announced that no income tax will be payable on annual earnings of up to Rs. 12 lakh, as part of the Union Budget 2025. The announcement, made during her address in Parliament on Saturday, is expected to bring considerable relief to taxpayers, particularly the middle-income group that has traditionally faced higher tax obligations.

Under the new tax regime, Sitharaman stated, “The government proposes to introduce nil tax on income up to Rs. 12 lakh per annum.” She further added that individuals earning Rs. 12 lakh annually would benefit from a reduction of Rs. 80,000 in their tax liabilities.

Emphasizing the importance of the middle class to the country’s economy, Sitharaman noted, “The middle class provides strength to the economy. In recognition of their contribution, we have periodically reduced the tax burdens, and now, I am happy to announce that there will be no income tax on income up to Rs. 12 lakh.”

The Finance Minister also unveiled changes to the income tax slabs, benefiting taxpayers across all income categories.

The revised income tax slabs under the new tax regime are as follows:

Income up to Rs. 4 lakh: Nil

Income between Rs. 4 lakh and Rs. 8 lakh: 5%

Income between Rs. 8 lakh and Rs. 12 lakh: 10%

Income between Rs. 12 lakh and Rs. 16 lakh: 15%

Income between Rs. 16 lakh and Rs. 20 lakh: 20%

Income between Rs. 20 lakh and Rs. 24 lakh: 25%

Income above Rs. 24 lakh: 30%

In addition to the new slabs, the Finance Minister confirmed that salaried taxpayers with a standard deduction of Rs. 75,000 would have an effective income tax exemption up to Rs. 12.75 lakh. Furthermore, tax rebates will be provided to individuals earning up to Rs. 12 lakh annually, ensuring that no tax is levied on their normal income, excluding special-rate income such as capital gains.

Tax relief as per budget announcements:

Income (in Rs)	Tax Benefit (in Rs)	Effective Tax Rate
12 Lakh	80,000	0%
16 Lakh	50,000	7.5%
18 Lakh	70,000	8.8%
20 Lakh	90,000	10%
25 Lakh	1,10,000	13.2%
50 Lakh	1,10,000	21.6%

This move is expected to offer considerable relief to the middle class while making the tax system more progressive and easier to navigate for a wider range of taxpayers.