Middle Class Impacted: Key Changes in Tax Regimes Unveiled in Budget 2025-26

"Budget 2025-26: Key Tax Changes Affecting the Middle Class"

Finance Minister Nirmala Sitharaman announced new tax slabs for 2025-26, providing relief for middle-class taxpayers earning up to Rs 12 lakh annually.

Alex Chen3 hours agoLast Update : 3 hours ago

Old vs New Tax regime: What has changed for middle class in Budget 2025-26

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On February 1, 2025, Finance Minister Nirmala Sitharaman announced new tax slabs aimed at easing the tax burden on middle-class taxpayers during the Union Budget 2025-26 presentation. The revised tax structure is designed to benefit individuals earning up to Rs 12 lakh annually, with significant changes to the tax exemption limits and rates.

6 Key Takeaways

New tax slabs introduced for middle-class taxpayers
No tax on income up to Rs 4 lakh
Tax rates increase progressively for higher incomes
Enhanced tax rebate under Section 87A
Capital gains income taxed separately
New regime effective from April 1, 2025

Fast Answer: The Union Budget 2025-26 introduces new tax slabs for middle-class taxpayers, raising the exemption limit to Rs 12.75 lakh for salaried individuals. Key changes include no tax on income up to Rs 4 lakh, and substantial savings for those earning up to Rs 25 lakh. The new regime will take effect from April 1, 2025, pending parliamentary approval.

The new tax regime proposed by Finance Minister Sitharaman aims to provide relief to middle-class taxpayers by adjusting tax slabs and increasing the exemption limit. Under the new structure, individuals with an annual income of up to Rs 4 lakh will not be taxed. The exemption limit for salaried individuals has been raised to Rs 12.75 lakh, which includes standard deductions.

Key details of the new tax slabs include:

No tax for income up to Rs 4 lakh.
5% tax on income between Rs 4 lakh and Rs 8 lakh.
10% tax on income between Rs 8 lakh and Rs 12 lakh.
15% tax on income between Rs 12 lakh and Rs 16 lakh.
20% tax on income between Rs 16 lakh and Rs 20 lakh.
25% tax on income between Rs 20 lakh and Rs 24 lakh.
30% tax on income above Rs 24 lakh.

In addition to the new tax slabs, the government has increased the tax rebate under Section 87A, allowing individuals with a net taxable income of up to Rs 12 lakh to pay no income tax. However, those earning exactly Rs 12 lakh will still pay tax according to the slab rates but will benefit from the rebate, reducing their final tax liability. It’s important to note that income from capital gains will not qualify for this rebate and will be taxed separately.

Notice: Canadian readers should be aware that tax structures and regulations differ significantly in Canada. Consult local tax authorities for accurate information regarding Canadian tax policies.

The new tax regime is set to take effect from April 1, 2025, pending approval from Parliament. This represents a shift from the previous structure, which had a basic exemption limit of Rs 2.5 lakh and allowed various deductions. The changes are expected to provide substantial tax relief to middle-class individuals, making it easier for them to manage their finances.