Budget 2025: Detailed Analysis of New Income Tax Slabs
On 1 February 2025, Finance Minister Nirmala Sitharaman
presented the Union Budget in which several important changes were announced in
the income tax structure. These changes have been designed to provide relief to
the middle class and increase consumption. Let us understand the details and
impact of these announcements carefully.
New Income Tax Slabs for financial year 2025:
The government has announced a new and revamped tax regime
with updated tax slabs. The tax rates are given below:
- Income range 0 - 4,00,000 = 0% (Tax-Free)
- Income range 4,00,001 - 8,00,000 = 5%
- Income range 8,00,001 - 12,00,000 = 10%
- Income range 12,00,001 - 16,00,000 = 15%
- Income range 16,00,001 - 20,00,000 = 20%
- Income range 20,00,001 - 24,00,000 = 25%
- Income range more than Rs 24,00,001 = 30%
Key Changes and Benefits of new budget
Increased Tax-Free Income Limit:
Earlier the tax-free income limit was INR 3,00,000. Now it
has been increased to INR 4,00,000, giving full tax exemption to lower income
taxpayers.
Standard Deduction Hike:
Standard deduction has been increased from INR 50,000 to INR
75,000. This move will benefit salaried individuals and pensioners.
Higher Tax Relief for Middle-Income Groups:
The introduction of 10% and 15% slabs will significantly
reduce the tax liability of people earning between INR 8,00,001 and INR
16,00,000.
Simplified Tax Filing Process:
The government has promised to simplify the tax filing
process, which will make compliance easier.
Increase in Consumption:
Reducing tax burden will give people more disposable income,
which will boost consumption and economic growth.
New budget Impact of Different Income Groups
Lower-Income Group (Up to INR 8,00,000)
Taxmen of this category will benefit from increased tax-free
income limit and lower 5% tax rate. This will give full tax exemption to people
earning up to INR 4,00,000, which was earlier up to INR 3,00,000.
Middle-Income Group (INR 8,00,001 to INR 16,00,000)
This segment will benefit the most from the new tax
structure. The introduction of 10% and 15% slabs will significantly reduce the
overall tax liability. Higher standard deduction will also reduce taxable
income.
High-Income Group (Above INR 24,00,000)
The top tax rate remains at 30%, but taxpayers in this
income bracket will also benefit from an increased standard deduction. No
specific major changes have been made for this group.
Economic Implications of New Tax Slabs
1. Consumption Boost:
Higher disposable income is expected to increase consumer
spending, which will benefit retail, real estate and automobile sectors.
Investment Growth:
Higher disposable income can lead to more investment in
financial instruments, which will support capital market growth.
Economic Growth:
The government's focus is to stimulate demand through tax
relief, which can boost India's GDP growth.
Encouraging Compliance:
Simple tax regime and reduced rates will encourage more
people to file honest tax returns, which will broaden the tax base.
Comparison with Purana Tax Regime
Under the previous tax regime, taxpayers had to face much higher tax rates but the new regime clearly offers better savings for different income groups.
Expert Opinions in new budget 2025
Finance experts have welcomed these changes and said that
the revised tax structure is a positive step. Some experts have given their
opinion:
• Rajesh Murli, Tax Consultant: “Increased tax-free limit
and standard deduction is a good move for salaried individuals. It will
definitely boost consumption.”
• Neeta Adhikari, Economist: “By targeting middle-class
taxpayers, the government is giving relief to those who drive demand in the
economy. This aligns with the budget growth-oriented objectives.”
How to take maximum advantage of the new tax regime
1. Claim standard deduction: Make sure to claim the full
deduction of INR 75,000.
2. Invest Wisely: Choose investment options that offer tax
benefits such as Public Provident Fund (PPF) and National Pension Scheme (NPS).
3. Plan Your Income: If you have flexibility in your income
structure, reduce tax liability by optimising your salary components.
4. Take Professional Advice: Consulting a tax advisor can
help you understand the changes and take full advantage of the new regime.
Conclusion
Union Budget 2025 has brought much-needed relief for
taxpayers, especially the middle class. New income tax slabs, increased
standard deduction and simplified filing process will improve compliance, boost
consumption and contribute to overall economic growth.
