No Income Tax For Annual Income Of Up To Rs 12 Lakh

Taxpayers in the Indian middle class got great news from the Union Budget of 2025. Nirmala Sitharaman, the Finance Minister, told everyone that individuals who earn up to 12 lakh rupees yearly will not pay any income tax in the new tax regime. Because of a 75,000 rupee standard deduction, the limit for those with salaries becomes 12.75 lakh rupees. 

It is expected that this change will decrease the tax load carried by middle-income groups. This will allow them to have more money they can use, which will increase how much they consume. Moreover, this will encourage more savings and investment activity. 

Here’s everything you need to know about this landmark tax relief: 

New Tax Slabs for FY 2025-26 

The government has introduced revised tax slabs under the new tax regime: 

 

What This Means for Middle-Class Taxpayers 

Earlier, if you earned 12 lakh rupees annually, you had to pay roughly 80,000 rupees in taxes under the new system. Today, because they introduced tax rebates and changed the tax brackets, you will pay no tax. This causes a big increase in your take-home pay, which gives you much more financial freedom. 

Salaried people benefit from a standard deduction of 75,000 rupees. Which means those earning up to 12.75 lakh rupees will similarly find that they owe no taxes. 

How This Change Benefits Taxpayers 

Increased Disposable Income: If the government reduces the sum of taxes that families must give, then those families will have a larger amount of money available to use for buying the essential goods they need and for participating in the leisure activities they prefer. 

Savings and Investments: When people possess a larger quantity of funds that they can use for spending, they might make decisions to increase the amount of money they keep in their savings accounts, they could put their money into fixed deposit accounts, buy mutual fund investments, or purchase real estate properties. 

Encouragement for Middle-Class Growth: This reduction in taxes gives support to India's middle class, and it helps families make their lives better and plan how they will handle their money in the future. 

Easy Taxation System: People find that the new tax structure is more clear and easier to understand, so they can plan their taxes with greater ease. 

Impact on Individuals Earning Slightly More than Rs 12 Lakh 

For individuals earning slightly above Rs 12 lakh, the government has introduced marginal relief to ensure their effective tax liability remains minimal. 

For example, an individual earning Rs 12.10 lakh would normally be required to pay Rs 61,500 in tax under the new slabs. However, due to marginal relief provisions, they will only pay Rs 10,000 in tax, ensuring their take-home salary remains nearly the same as someone earning Rs 12 lakh. 

Standard Deduction and Rebate Benefits 

• Standard Deduction: Salaried individuals get a standard deduction of Rs 75,000 under the new regime, making income up to Rs 12.75 lakh tax-free. 

• Maximum Tax Rebate: The government is providing a tax rebate of Rs 60,000 for individuals earning up to Rs 12 lakh, ensuring zero tax liability. 

Who Benefits from This Change? 

The new tax structure applies to: 

• Individual taxpayers 

• Hindu Undivided Families (HUFs) 

• Associations of Persons (AOPs) 

• Body of Individuals (BOIs) 

This change primarily benefits middle-income earners, salaried professionals, and small business owners. 

Comparison of Tax Liability Before and After the Change 

Annual Income (Rs)	Tax Paid (Old Regime)	Tax Paid (New Regime)	Savings (Rs)
8 lakh	30000	0	30000
10 lakh	50000	0	50000
12 lakh	80000	0	80000
16 lakh	170000	120000	50000
20 lakh	290000	200000	90000

 

Future Implications and Economic Impact 

• Higher Consumption: When individuals possess increased financial resources, they tend to increase their spending habits, and this consequently results in a rise in the need for various products and services. 

• Increase in Investments: Individuals who have more money available after paying their expenses can choose to invest larger amounts of that money. These choices of investment can increase when people have more money left over after their necessary spending. 

• Ease of Filing Taxes: When the government simplifies the tax system, people find it less difficult to follow the rules and they can complete their tax forms without facing excessive challenges. 

• Encouragement for Higher Earnings: A tax system that treats people fairly can give them a stronger desire to earn more money, because they will not be as concerned about having to pay a large amount of their income in taxes. 

Disclaimer: All the information specified above was sourced when this page was written and is subject to change. For exact information, refer to the Income Tax Department’s website. 

Frequently Asked Questions

1. Who will benefit from the new income tax exemption of ₹12 lakh?

The new tax rules let people earning up to ₹12 lakh per year pay no tax. If you have a salary and get a ₹75,000 deduction, you pay no tax on income up to ₹12.75 lakh. 

2. What are the new income tax slabs introduced in Budget 2025? 

You pay no tax on income up to ₹4 lakh, then 5% on ₹4-8 lakh, 10% on ₹8-12 lakh, 15% on ₹12-16 lakh, 20% on ₹16-20 lakh, 25% on ₹20-24 lakh, and 30% on income above ₹24 lakh. 

3. How much tax would someone earning ₹12 lakh have to pay now? 

The new tax laws establish that individuals earning 12 lakh rupees each year do not have to pay any taxes because the government has adjusted the tax brackets downwards and provided tax relief measures. 

4. Is the standard deduction available in the new tax regime? 

Salaried workers can indeed take a standard deduction of ₹75,000 when they use the new tax regime. This action effectively raises the total income they do not pay taxes on to ₹12.75 lakh. 

5. How does this new tax structure benefit the middle class? 

When the government reduce the tax burden, the new structure allows people to have a greater amount of money that they can spend. This then encourages households to increase their spending, to save more money, and to invest more, and in this way they boost the growth of the economy. 

 

Disclaimer: This page includes information that has been compiled from many sources and is only offered for informational purposes. Since this type of data might change over time, we cannot guarantee that the information supplied or included within it is accurate. It is anticipated that the user would confirm with the relevant source prior to taking any choices or actions.