Union Budget 2025: Middle Class Cheers as No Tax Up to ?12 Lakh Becomes Reality
The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, has brought significant relief to India’s middle class with a major announcement—no income tax for individuals earning up to ?12 lakh annually under the new tax regime. This move, aimed at boosting disposable income, increasing savings, and driving economic growth, is set to benefit millions of taxpayers across the country.
*Key Announcements and Tax Reforms*
1. *Income Tax Exemption Raised to ?12 Lakh*
Individuals earning up to ?12 lakh annually will be exempt from paying income tax under the new tax regime. Previously, this exemption was capped at ?7 lakh under Section 87A. This revision provides financial relief to salaried professionals, self-employed individuals, and small business owners.
In her budget speech, Finance Minister Nirmala Sitharaman stated, "This historic tax relief will empower the hardworking middle class, allowing them to save more, invest more, and contribute effectively to our economy."
2. *Standard Deduction Increased*
For salaried taxpayers, the government has increased the standard deduction to ?75,000, effectively raising the tax-free income threshold to ?12.75 lakh. This measure ensures greater savings while maintaining financial stability.
3. *Simplification of Tax Compliance*
The budget also proposes a new Income Tax Bill aimed at simplifying tax laws, reducing compliance burdens, and making the filing process more transparent and hassle-free for taxpayers.
*Impact on the Middle Class and the Economy*
1. *Increased Disposable Income and Consumer Spending*
The tax relief ensures that households retain more of their earnings, leading to increased consumer spending on essentials, housing, automobiles, and luxury goods. This is expected to drive demand across key sectors, further boosting GDP growth.
2. *Higher Savings and Investments*
With reduced tax liability, individuals are likely to channel their extra income into savings, mutual funds, stock markets, and real estate, strengthening financial markets and long-term wealth creation.
3. *Enhanced Economic Growth and Employment Generation*
Economists predict that this measure will contribute 0.5% - 0.7% additional GDP growth, as higher disposable income stimulates economic activity. Sectors such as real estate, banking, and retail are set to benefit, leading to significant job creation across industries.
*Comparison with Previous Tax Regime*
| Income Slab (Annual) | Old Tax Regime | New Tax Regime (2025) |
|----------------------|---------------|---------------------|
| Up to ?7 lakh | 0% | 0% |
| ?7 - ?12 lakh | Taxable at 10-15% | 0% |
| ?12 lakh and above | Higher slabs apply | Lowered rates to reduce burden |
This shift makes the new tax regime more attractive to taxpayers who prefer a simplified tax structure with minimal deductions.
*Government’s Vision for a Taxpayer-Friendly Economy*
With this historic tax reform, the government has taken a major step toward rationalizing taxation while ensuring greater financial inclusion. The move aligns with India’s long-term vision of reducing income tax burdens, increasing voluntary tax compliance, and supporting the aspirations of the growing middle class.
*Conclusion: A Game-Changer for India’s Taxpayers*
The Union Budget 2025’s revision of tax slabs represents a transformative policy aimed at empowering millions of Indian taxpayers, boosting economic growth, and enhancing financial security. As the middle class cheers this landmark tax relief, India moves closer to an era of simplified taxation, higher savings, and robust consumer-driven growth.
This budget not only acknowledges the role of the middle class in the economy but also ensures that their contributions are rewarded with greater financial freedom and economic prosperity.
