In a boost for the middle class, Finance Minister Nirmala Sitharaman, in her Union Budget 2025 presentation, unveiled a major overhaul of the new tax regime, introducing a zero-income tax slab for taxpayers earning up to Rs 12 lakh annually under the new tax regime.

The move will benefit a large section of the population, especially salaried individuals, by reducing their overall tax liabilities.

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The new rule provides additional relief for salaried individuals, who will benefit from an enhanced Rs 12.75 lakh exemption when considering the standard deduction of Rs 75,000.

This shift is expected to have a transformative impact on household incomes, providing a significant boost to savings, consumption, and investments.

Across the board, changes to income tax slabs and rates will benefit taxpayers at various income levels.

With this revision, under the New Tax Regime (NTR), the revised tax slabs are Rs 0-4 lakh: NIL; Rs 4-8 lakh: 5%; Rs 8-12 lakh: 12%; Rs 12 -16 lakh: 15%; Rs 16-20 lakh: 20%; Rs 20-24 lakh: 25%; and Above ₹24 lakh: 30%.

With the new slabs coming into force, common man will be left with more disposable income, there is potential for an increase in savings, which could translate into greater investments in assets like mutual funds, stocks, and real estate.

The Finance Minister also announced a New Income Tax Bill to be introduced next week.

“Government has dedicatedly introduced tax reforms including faceless assessment, the taxpayer charter, and faster processing of returns,” she said.

The move will lead to potential reforms, from tax rate cuts to an overhaul of the system, aimed at boosting consumption, simplifying taxation, and driving economic growth.

The Finance Minister also announced rationalisation of the TDS and TCS regime.

TDS to be rationalised by reducing the number of rates and thresholds. Threshold limit for TCS on LRS remittance hiked from Rs 7 lakh to 10 lakh

The TDS threshold limit on rent has also been hiked to Rs 6 lakh, and she proposed to remove TCS on education loans up to Rs 10 lakh (from specified financial institutions).

She further announced that the time limit to file updated tax returns extended from two to four years. Two self-occupied properties in place of one can be valued at Nil.