Budget 2025-26: Income up to Rs12 lakh to get tax exemption

03 Feb 2025

Budget 2025-26: Income up to Rs12 lakh to get tax exemption
Image source: Tech Sgt. Vernon Young Jr - Archive: U.S. Secretary of Defense, CC BY 2.0, via Wikimedia Commons
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Presenting the budget in Parliament, finance minister Nirmala Sitharaman proposed an across-the-board change in income-tax slabs and rates – raising tax slabs and rebates while reducing tax rates - to benefit all tax-payers.

Raised tax slabs and reduced rates would combine to make salary incomes up to Rs12 lakh tax-exempt under the budget proposals for the 2025-26 financial year.

With standard deduction of Rs75,000 on annual income up to Rs12 lakh, the tax exemption limit for salary incomes could go up to Rs12,75,000, say tax experts.

“There will be no income tax payable upto income of Rs12 lakh (ie, average income of Rs1 lakh per month other than special rate income such as capital gains) under the new regime. This limit will be Rs12.75 lakh for salaried tax payers, due to standard deduction of Rs75,000,” Sitaraman said. Tax rebate is being provided in addition to the benefit due to slab rate reduction in such a manner that there is no tax payable by them, she added.

Across-the-board changes in income tax slabs and rates proposed in the union budget 2025-26 are meant to benefit all, so as to increase demand and consumption in the whole economy.

Higher tax slabs, rate reduction and rebates will result in substantial tax relief to the middle class and boost both household consumption expenditure and investment.

Under the new tax regime, a tax payer with an income of Rs12 lakh will get a benefit of Rs80,000 in tax (which is 100 per cent of tax payable under existing rates).

A person having income of Rs18 lakh will get a benefit of Rs70,000 in tax (30 per cent of tax payable as per existing rates).

Those having an income of Rs25 lakh gets a benefit of Rs1,10,000 (25 per cent of his tax payable as per existing rates).

The basic exemption under the old tax regime remains unchanged at Rs2.25 lakh.

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