In Union Budget 2025 announcement, Nirmala Sitharaman floored everyone by giving a massive announcement on the changed income tax structure in India. Middle income groups need not worry, the new regime now allows people earning less than ₹12 lakhs effectively no taxes to pay compared to the previous ₹ 7 lakhs limit. The change intends to increase spending money , make taxation easier and encourages the new tax regime.
Here are some things worth remembering:
Key Highlights of Union Budget 2025 Tax Reforms
1. Tax Free Income Tmax Increase: New regime allows no taxation for income earners up to ₹12 lakhs, self employed and salary employees can benefit from this immensely.
2. Revised taxation slabs
Divide:
0 – 12 Lakhs: 0%
12 – 15 Lakhs: 10%
15 – 20 Lakhs: 20%
20 Lakhs And Above: 30%
3. Standard Deduction Increased: The previous self employed and salary employee taxation slabs of 50,000 have been increased to 1 lakh.
4. No changes so far in other regime: For those continuing with the older regime this will remain the same.
Why Is This Change Important
This means people earning near ₹ 15 lakhs will save ₹ 37,500 more when compared to 2024.
Let us take an example:
New Regime (FY 2024): Tax= 1.17 Lakh Taxable Income
Old Regime (FY 2025): Tax= 30,000
Annual savings: 87,000!
“This budget prioritizes putting money back into the hands of India’s aspirational middle class”, said Sitharaman noting the government remains focused on reducing the burden of ever growing expenses.
Despite the fact that the new regime provides cash flow convenience, the old system does continue to be advantageous for those with considerable investments (PPF, insurance, and home loan). Here is a succinct guide on the two:
Note: Old regime assumes basic deductions such as 80C, HRA etc.
Income New Regime Tax Old Regime Tax
10 Lakh 0 78,000
15 Lakh 30,000 1.17 Lakh
20 Lakh 1.3 Lakh 2.73 Lakh
. Rohit Jain, CA: “This will push millennials to adopt the new regime, but long term investors might stick to the old system for wealth- building benefits.”
. Deepika Sharma, Economist: “Increased disposable income could lead to higher consumption, further growing sectors such as auto, real estate and retail.”
Nonetheless, there are claims that the step ignores the culture of savings. “The government is discouraging investments by limiting deductions”, said a banking senior executive.
A step by step guide to optimize savings under the New Regime
1. If your annual earnings fall under ₹20 lakh and you lack significant investments, then switch to the New Regime.
2.Claim Enhanced Standard Deduction of ₹1 lakh for salaried users.
3.Opt for Employer-provided perks like meal coupons, which are exempted.
4.Reassess Investments by shifting focus from 80C instruments to higher-return options like equities.
5.Compare regimes using the tax calculator tools found on the Income Tax department’s website.
What’s doesnt change?
Surcharge of 10% applies to income above ₹50 lakh. Cess of 4% health and education cess applies to all slabs. There are no changes to the capital gains tax rates for LTCG or STCG.
By increasing the tax-free limit, the government intends to Kako stimulate demand in the economy while simultaneously reduce compliance burdens for salaried professionals as well as encourage formal employment.
Q1. Is the ₹12 lakh exemption available for all ages?
Yes, however people older than 60 years still benefit from increased interest exemptions under the old regime.
Q2. Can i change regimes after every year?
Yes. You have a choice to opt for a difference regime every during ITR filings.
Q3. Are there any undetected restrictions?
No, however most deductions except standard reimbursement are disallowed in the new regime.
Final Takeaway is that the new reforms in the Union Budget 2025 are a clear win for the middle class and improves liquidity.
Even under this consideration, savers may feel abandoned but the efforts are consistent with India’s transition to being consumption led. As rightly put by Sitharaman, this is a budget expected and desired by the aspirational India- aIndia that has an earning, spends, and grows.