Tax bonanza: What Budget 2025 means for India's beleaguered middle-class

No tax on income up to ₹12 lakh, revised tax slabs, senior citizen benefits, and homeowner relief announced by FM Nirmala Sitharaman to ease the financial burden on the middle-class

Finance Minister Nirmala Sitharaman announced significant tax relief for the middle-class in her Budget 2025-26 speech, declaring that individuals earning up to ₹12 lakh annually will be exempt from income tax. The initiative aims to reduce the tax burden on the middle-class and stimulate consumer spending.

 

In addition to the income tax rebate, Sitharaman introduced benefits for senior citizens and homeowners.

 

Budget 2025 highlights for the middle-class

  No income tax up to ₹12 lakh

 

Presenting her eighth consecutive Budget in the Lok Sabha, Sitharaman stated that individuals earning up to ₹12 lakh per year (excluding special rate income such as capital gains) would be exempt from income tax under the new tax regime. For salaried employees, this limit increases to ₹12.75 lakh per annum due to a standard deduction of ₹75,000.

 

 

Currently, the tax rebate under Section 87A provides a 100 per cent rebate on income up to ₹7 lakh.

 

Revised tax slabs

 

The finance minister also announced new tax rates under the updated tax regime:

 

• Up to ₹4 lakh - 0%

 

• ₹4-8 lakh - 5%

 

• ₹8-12 lakh - 10%

 

• ₹12-16 lakh - 15%

 

• ₹16-20 lakh - 20%

 

• ₹20-24 lakh - 25%

 

• Above ₹24 lakh - 30%

 

While the tax rebate limit has been raised, the basic exemption remains unchanged. If an individual’s annual income exceeds ₹12.75 lakh, taxes will be calculated based on the revised slabs in the new assessment year. 

   

Tax benefits at different income levels

 

• Income of ₹12 lakh: Tax benefit of ₹80,000 (100 per cent of tax payable under existing rates)

 

• Income of ₹18 lakh: Tax benefit of ₹70,000 (30 per cent of tax payable under existing rates)

 

• Income of ₹25 lakh: Tax benefit of ₹1,10,000 (25 per cent of tax payable under existing rates)

 

Relief for senior citizens

 

Sitharaman announced the doubling of the tax deduction limit on interest from ₹50,000 to ₹1 lakh.

 

“A number of senior and very senior citizens have long-standing National Savings Scheme (NSS) accounts. Since interest is no longer payable on these accounts, I propose to exempt withdrawals made from NSS by individuals on or after August 29, 2024. Similar treatment will be extended to NPS Vatsalya accounts, subject to overall limits,” she stated.

 

The annual TDS limit on rent payments will also increase from ₹2.40 lakh to ₹6 lakh, reducing transactions liable to TDS and benefiting small taxpayers.

 

Relief for homeowners

 

Sitharaman announced that taxpayers can now classify the annual value of two self-occupied properties as zero. Previously, this benefit was available only under specific conditions.

 

The change exempts individuals from paying taxes on the assumed rental income of additional properties, providing considerable financial relief to middle-income homeowners.