Union Budget 2025: Big relief for middle class as no income tax payable upto Rs 12 lakh, says FM

In a big bonanza for salaried taxpayers, Union Finance Minister Nirmala Sitharaman announced that there will be no income tax to be paid for income levels up to Rs 12 lakh. "There will be no income tax payable up to Rs 12 lakh - up to Rs 12.75 lakh including standard deductions - under the new regime," FM Nirmala Sitharaman said on Saturday as she read out the Union Budget 2025.

In an announcement accompanied by loud cheers and enthusiastic thumping of desks by BJP MPs, led by Prime Minister Narendra Modi, she also announced revisions to the tax slabs (again, applicable to the new regime only).

New tax regime

0-4 lac: NIL

4-8 lakh: 5%

8-12 lakh: 10%

12-16 lakh: 15%

16-20 lakh: 20%

Rs 20-24 lakh - 25%

Above 24 lakh: 30%

Sitharaman said, it will "substantially reduce the tax burden on the middle class and leave more money in their hands". This, she said, will boost household consumption, savings, and investment.

This big-ticket announcement by the Finance Minister followed confirmation that a new direct tax code - meant to simplify compliance for individual taxpayers - will be introduced next week.

Finance Minister Nirmala Sitharaman on Saturday said a new income tax bill will be announced next week. The bill would reflect the government's decade-long efforts focused on enhancing taxpayer convenience.

In her Union Budget 2025-26 speech, she mentioned the tax department's approach of "trust first, scrutinise later", assuring the government’s continued commitment to ease compliance.