FM Sitharaman has delivered a significant tax relief for taxpayers in her budget speech by making annual income of up to Rs 12 lakh in the new tax regime tax-free.
In her Budget speech, FM Nirmala Sitharaman hiked the basic income exemption limit from Rs 3 lakh to Rs 4 lakh. Since the 87A rebate was raised from Rs 25,000 to Rs 60,000, individuals with annual income from up to Rs 12,00,000 will see their tax liability reduced to 0.
As per the budget memorandum, “to enhance the limit of total income for rebate in clauses (a) and (b) of the first proviso under section 87A, on which the income tax is payable as per the rates of income tax under sub-section (1A) of section 115BAC, from Rs. 7,00,000 to Rs. 12,00,000 and the limit of rebate in clause (a) of first proviso to section 87A from Rs. 25,000 to Rs. 60,000,”
In a much anticipated move, the government has announced an increase in the rebate limit under Section 87A of the Income Tax Act. The rebate limit has been raised from Rs 7 lakhs to Rs 12 lakhs, offering significant tax relief to the middle class. For salaried individuals, who are eligible for a standard deduction of Rs 75,000, the effective rebate limit now stands at Rs 12.75 lakhs.
The middle class was hoping for a favorable change in the income tax slabs ahead of the Union Budget 2025-26, and they were not disappointed. A day before, PM Modi had invoked the blessings of Goddess Lakshmi to bless the poor and middle class, potentially hinting towards major income-tax changes.
Income Tax Budget 2025 Live Updates: Here is how the new tax regime will now look like:
Zero to Rs 4,00,000— No Tax
Rs 4,00,000 to Rs 8,00,000—5%
Rs 8,00,0001 to Rs 12,00,000—10%
Rs 12,00,001 to 16 lakh rupees—15%
Rs 16,00,001 to 20 lakh rupees—20%
Rs 20,00,001 to 24 lakh rupees– 25%
Above 24 lakh—30%