Finance Minister Nirmala Sitharaman’s recent Budget announcement has raised the income tax rebate limit under Section 87A to Rs 12 lakh, offering substantial relief to middle-class taxpayers. As a result, resident individuals with a net taxable income up to Rs 12 lakh will not have to pay any income tax. This update benefits approximately 1 crore additional salaried Indians.
Following the Budget announcement, Finance Minister Nirmala Sitharaman stated in a post-Budget press briefing, “1 crore more people will pay no tax after this announcement.”
In a significant move for taxpayers, the Finance Minister revealed an increase in the tax rebate under Section 87A in the Union Budget 2025. Under the revised structure, resident individuals with a net taxable income of up to Rs 12 lakh will now be exempt from paying income tax. This is a significant rise from the previous threshold of Rs 7 lakh under the new tax regime.
Salaried individuals who benefit from the standard deduction of Rs 75,000 will also pay zero tax if their gross taxable income does not exceed Rs 12.75 lakh. However, if the net taxable income surpasses Rs 12 lakh, the tax liability will be determined based on the chosen tax regime—either the new or old.
During her Budget presentation, the Finance Minister stated, “There will be no income tax payable for incomes up to Rs 12 lakh. This is aimed at providing significant relief to middle-class taxpayers.”
The newly announced income tax slabs are as follows:
- Up to Rs 4,00,000: 0%
- Rs 4,00,001 to Rs 8,00,000: 5%
- Rs 8,00,001 to Rs 12,00,000: 10%
- Rs 12,00,001 to Rs 16,00,000: 15%
- Rs 16,00,001 to Rs 20,00,000: 20%
- Rs 20,00,001 to Rs 24,00,000: 24%
- Above Rs 24,00,001: 30%
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