Budget 2025: Nirmala Sitharaman announces rejig of income tax rates — Here’s how slabs have changed under new tax regime

Finance Minister Nirmala Sitharaman announced a major overhaul of the income tax system while outlining the Budget on Saturday. Individuals earning up to ₹12 lakh annually will no longer have to pay any tax under the new income tax regime — with benefit of ₹80,000. Sitharaman also proposed a change to the exemption limits and rejigged the tax slabs and rates across the board.

What did the Finance Minister say?

Sitharaman announced on Saturday that there would be “no income tax payable upto income of ₹12 lakh” under the new regime — other than special rate income such as capital gains. This limit will be ₹12.75 lakh for salaried tax payers due to standard deduction of ₹75,000.

“Slabs and rates are being changed across the board to benefit all taxpayers. The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment,” she opined.

What are the new income tax slabs?

There will be no income tax levied on earnings below ₹4 lakh. Income between ₹4 lakh and ₹8 lakh will incur a 5% tax while the next slab — for salaries upto ₹12 lakh will have a 10% tax. A 20% tax will be levied on income between ₹16 lakh to ₹20 lakh. This will increase to 25% for earnings between ₹20 lakh and ₹24 lakh and further to 30% for income above ₹24 lakh.

According to details outlined in Budget 2025, a tax payer in the new regime with an income of ₹12 lakh will get a benefit of ₹80,000. Similarly a person having income of ₹18 lakh will get a benefit of ₹70,000 in tax and a person with an income of ₹25 lakh gets a benefit of ₹1.10 lakh.