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Union Budget 2025: Major Income Tax Relief Announced, Middle-Class Spending to Get a Boost

New Delhi : Union Minister Hardeep Singh Puri hailed the Union Budget 2025 as "excellent," emphasizing the significant income tax exemption up to ₹12 lakh, which he believes will drive middle-class spending and stimulate economic growth.

“It is an excellent budget… The middle class has been exempted from income tax on earnings up to ₹12 lakh, among several other beneficial provisions,” Puri told ANI. He further stated that the budget instills a "feel-good factor," encouraging both infrastructure investments and increased consumer spending due to tax relief.

Significant Income Tax Reforms

Presenting the Union Budget 2025, Finance Minister Nirmala Sitharaman announced that individuals earning up to ₹12 lakh annually will pay no income tax, providing substantial relief to taxpayers, particularly the middle class. For salaried individuals, the limit extends to ₹12.75 lakh, factoring in the ₹75,000 standard deduction.

"To taxpayers with up to ₹12 lakh of normal income (excluding capital gains and other special rate income), a tax rebate is being provided, in addition to slab rate reductions, ensuring they pay no tax," Sitharaman stated.

The announcement was met with enthusiastic applause from treasury benches, led by Prime Minister Narendra Modi. Sitharaman also revealed an overhaul of income tax slabs and rates, making taxation more progressive and beneficial for all taxpayers.

Revised Tax Slabs and Benefits

Under the new tax regime, the tax-free income threshold has been raised from ₹3 lakh to ₹4 lakh. The revised structure is expected to leave more disposable income in the hands of taxpayers, boosting household consumption, savings, and investment.

Key tax benefits under the new regime include:

  • A taxpayer earning ₹12 lakh will save ₹80,000 in taxes.

  • A taxpayer earning ₹18 lakh will benefit by ₹70,000
    .
  • A taxpayer with an annual income of ₹25 lakh will save ₹1.1 lakh.

However, the full ₹12 lakh exemption is subject to availing deductions under various sections of the Income Tax Act, including ₹1.5 lakh under Section 80CCC and an additional ₹1.5 lakh for home loan interest payments.

Revenue Implications

The government has estimated a revenue loss of ₹1 lakh crore in direct taxes and ₹2,600 crore in indirect taxes due to these reforms. Despite this, the budget is expected to enhance economic activity by increasing consumer spending and boosting investor confidence.

With its focus on taxpayer relief and economic growth, Budget 2025 signals a significant step towards a simpler and more progressive taxation system, aligning with the government's vision of empowering the middle class and driving economic expansion.

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