Finance Minister Nirmala Sitharaman has announced significant income tax relief in the Union Budget 2025-26, eliminating tax liability for individuals earning up to ₹12 lakh annually under the new tax regime. The revised structure also expands the zero-tax bracket from ₹3 lakh to ₹4 lakh.

With the inclusion of the standard deduction of ₹75,000, salaried employees earning up to ₹12.75 lakh will effectively pay no tax. This marks a significant jump from the previous exemption limit of ₹7.75 lakh. The old tax regime, which allows deductions, remains unchanged, reinforcing the government's push towards the simplified new regime introduced in 2020.

New Income Tax Slabs Under the Revised Regime

• ₹0 – ₹4 lakh: No tax
• ₹4 – ₹8 lakh: 5%
• ₹8 – ₹12 lakh: 10%
• ₹12 – ₹16 lakh: 15%
• ₹16 – ₹20 lakh: 20%
• ₹20 – ₹24 lakh: 25%
• Above ₹24 lakh: 30%

A taxpayer earning ₹12 lakh annually will now save ₹80,000 in tax, while those with incomes of ₹18 lakh will benefit by ₹70,000.

Comparison With 2014 Tax Rates

Highlighting the contrast with the tax structure a decade ago, Sitharaman stated that under the Congress-led government in 2014, an individual earning ₹8 lakh annually would have paid nearly ₹1 lakh in taxes, whereas now they pay nothing. Similarly, someone earning ₹12 lakh per year in 2014 paid ₹2 lakh in tax, but under the new tax structure, they owe nothing.

For those earning ₹24 lakh annually, the tax liability has dropped from ₹5.6 lakh in 2014 to ₹3 lakh, resulting in a saving of ₹2.6 lakh.

The Finance Minister emphasized that the revised tax slabs are designed to boost disposable income, encourage spending, and promote savings and investments.