The Hon. Finance Minister Smt. Nirmala Sitharaman presented her 8th Union Budget in Parliament on 1st February 2025. This Budget has been widely welcomed by all sections of society and hailed for its forward-looking and growth-oriented proposals. A special highlight is the tax reliefs for Middle-class taxpayers, especially salaried employees.
In this article, we will analyze the benefits that salaried employees will get through the proposed changes.
Budget 2025 has increased the nil-tax threshold to ₹ 12.75 lakhs for salaried employees and individuals with a higher standard deduction of ₹ 75,000 in the New Regime made in Budget 2024 from the earlier ₹ 50,000. However, for those who opt for the Old Regime the standard deduction remains at ₹ 50,000. The tax exemptions from the previous ₹ 7 lakhs to ₹ 12.75 lakhs is a major jump and has been hailed as the biggest jump in the past 4 decades. The budget also provides TDS relief to senior citizens and other depositors making fixed deposits more attractive.
Major changes in Income Tax slabs and rates in Budget 2025
Considering the Old Tax Regime and the New Tax Regime, no changes have been proposed in the latest budget proposal. Instead, the Finance Ministry has adjusted the slabs, rates, and rebates in the New Regime (25-26) to make income up to ₹ 12 lakhs tax-free, which was ₹ 7 lakhs in the FY 24-25.
Old Income tax regime: (Existing and applicable for FY 22-23)
| Old Income tax slab | Income tax rates |
| Income slab of 2.5 lakh | Nil |
| Income slab of 2.5 to 5.0 lakh | 5% |
| Income slab of 5.0 to 10.0 lakh | 20% |
| Income slab of 10.0 lakh and above | 30% |
New Income tax regime (Existing and applicable for FY 22-23)
| New Income tax slab ( Previous) | Income tax rates |
| Income slab of 2.5 lakhs | Nil |
| Income slab of 2.5 to 5.0 lakhs | 5% |
| Income slab of 5.0 to 7.5 lakhs | 10% |
| Income slab of 7.5 to 10.0 lakhs | 15% |
| Income slab of 10.0 to 12.5 lakhs | 20% |
| Income slab of 12.5 to 15.0 lakhs | 25% |
| Income slab of 15.0 lakhs and above | 30% |
New Income tax regime (Revised in Budget 2023)(For FY 23-24)
| New Income tax slab (Revised) | Income tax rates |
| Income slab of 3.0 lakhs | Nil |
| Income slab of 3.0 to 6.0 lakhs | 5% |
| Income slab of 6.0 to 9.0 lakhs | 10% |
| Income slab of 9.0 to 12.0 lakhs | 15% |
| Income slab of 12.0 to 15.0 lakhs | 20% |
| Income slab of 15.0 lakhs and above | 30% |
The IT slab under the New Regime (24-25) are detailed below:
| New Income Tax Slabs | Income Tax rates |
| Income slab of 3.0 lakhs | Nil |
| Income slab of 3.0 to 7.0 lakhs | 5% |
| Income slab of 7.0 to 10.0 lakhs | 10% |
| Income slab of 10.0 to 12.0 lakhs | 15% |
| Income slab of 12.0 to 15.0 lakhs | 20% |
| Income slab of 15.0 lakhs and above | 30% |
The Revised slabs under the New Regime (25-26) are detailed below:
| Total Income | Income tax Rates |
| Up to ₹ 4,00,000 | Nil |
| 4,00,001 to 8,00,000 | 5% |
| 8,00,001 to 12,00,000 | 10% |
| 12,00,001 to 16,00,000 | 15% |
| 16,00,001 to 20,00,000 | 20% |
| 20,00,001 to 24,00,000 | 25% |
| Above 24,00,000 | 30% |
The Income slabs proposed under the New Tax Regime in Budget 2025 are a great boon to salaried employees as it helps them to save Income tax up to a maximum of ₹1,14,000. These savings are based on the premise that an individual claims only the standard rebate of ₹ 75,000 under the new tax regime. However, a salaried employee can save more tax if he claims a deduction on his employer’s contribution towards the National Pension Scheme (NPS).
The savings under the proposed New Income tax regime are detailed below:
| Total
Taxable Income |
Tax Payable
as per the current Tax rates 2024-25 |
Tax payable as per
the New Tax rates 2025-26 |
Income tax saved through
Budget 2025 |
| 12,75,000 | 83,200 | 0 | 83,200 |
| 15,00,000 | 1,30,000 | 97,500 | 32,500 |
| 16,00,000 | 1,54,000 | 1,13,100 | 40,300 |
| 20,00,000 | 2,78,200 | 1,92,400 | 85,800 |
| 24,75,000 | 4,26,400 | 3,12,000 | 1,14,000 |
| 25,00,000 | 4,34,200 | 3,19,800 | 1,14,000 |
Comparison of tax payable (New Regime) for the FY 24-25 (AY 25-26) and FY 25-26 (AY 26-27)
| Tax Payable FY 24-25 (AY 25-26) | Tax Payable FY 25-26 (AY 26-27) |
| Total Taxable Income | Tax Rates | Tax Payable | Total Taxable Income | Tax Rates | Tax Payable |
| Up to 3,00,000 | 0% | ₹ 0 | Up to 4,00,000 | 0 % | ₹ 0 |
| 3,00,001 to 7,00,000 | 5% | ₹ 20,000 | 4,00,001 to 8,00,000 | 5% | ₹ 20,000 |
| 7,00,01 to 10,00,000 | 10% | ₹ 30,000 | 8,00,001 to 12,00,000 | 10% | ₹ 20,000 |
| 10,00,001 to 12,00,000 | 15% | ₹ 30,000 | 12,00,001 to 16,00,000 | 15% | ₹ 60,000 |
| 12,00,001 to 15,00,000 | 20% | ₹ 60,000 | 16,00,001 to 20,00,000 | 20% | ₹ 80,000 |
| 15,00,001 to 25,00,000 | 30% | ₹ 1,50,000 |
The proposed amendments in Budget 2025 may significantly boost the number of taxpayers who opt for the new tax regime. The middle-class income groups stand to gain the most, with the tax-free limit now raised up to ₹ 12.75 lakhs for salaried individuals and individuals, and the revised slabs reducing the overall taxable liability. Statistics show that 72% of taxpayers had opted for the New Tax Regime (23-24) up from 66% in the previous year. This trend is likely to continue due to the benefits the proposed amendments provide. However, taxpayers who benefit from deductions such as HRA, Home loans, and investments may still prefer the Old Tax Regime.
The proposed changes in Income Tax rates and rebates would put more spendable income in the hands of taxpayers which would hopefully encourage tax filing compliance. The flip side is that it could possibly discourage investment in savings schemes.
Conclusion
The proposed amendments in the Union Budget 2025 will greatly benefit the middle-class taxpayer, especially the salaried employee, and leave more disposable income in the hands of individuals thus enabling higher spending and investments.
Experts believe that the much-needed tax relief was necessary for boosting consumer demand, especially as it allows more disposable income in the hands of middle-class taxpayers. The proposed changes are bound to empower the taxpayer and promote greater financial inclusivity. GetifyHR has been at the forefront of supporting the needs of our clients in fulfilling their Income Tax needs and is fully equipped to handle the proposed changes. We are there to assist all our clients in seamlessly handling the statutory compliance requirements and keep the company fully compliant.
Leave A Comment