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  • Budget 2025 : How Will The New Tax Regime Benefit India’s Middle Class ?

Budget 2025 : How Will The New Tax Regime Benefit India’s Middle Class ?

The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, introduced sweeping changes to the income tax framework, aimed at providing substantial relief to India's burgeoning middle class.

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Budget 2025 : How Will The New Tax Regime Benefit India’s Middle Class ?


The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, introduced sweeping changes to the income tax framework, aimed at providing substantial relief to India’s burgeoning middle class. These changes seek to increase disposable incomes, promote financial stability, and stimulate broader economic growth by empowering households and boosting consumption.

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No Income Tax for Earnings up to ₹12 Lakh

A significant highlight of the Budget is the complete exemption of income tax for individuals earning up to ₹12 lakh annually under the new tax regime. This move directly benefits a vast segment of India’s working population, freeing them from tax liabilities and increasing their financial flexibility.

To further support salaried individuals, a standard deduction of ₹75,000 has been retained, effectively raising the tax-free threshold to ₹12.75 lakh. This provision ensures that salaried taxpayers enjoy additional tax relief compared to other categories.

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Income Tax

Revised Income Tax Slabs

  • 10% for income between ₹8 and ₹12 lakh
  • 15% for income between ₹12 and ₹16 lakh
  • 20% for income between ₹16 and ₹20 lakh
  • 25% for income between ₹20 and ₹25 lakh
  • 30% for income above ₹25 lakh

Illustrative Tax Benefits

  • Income of ₹12 lakh: Tax benefit of ₹80,000; effective tax rate: 0%
  • Income of ₹16 lakh: Tax savings of ₹50,000; effective tax rate: 7.5%
  • Income of ₹18 lakh: Tax benefit of ₹70,000; effective tax rate: 8.8%
  • Income of ₹25 lakh: Tax savings of ₹1.1 lakh; effective tax rate: 13.2%
  • Income of ₹50 lakh: Tax savings of ₹1.1 lakh; effective tax rate: 21.6%

The government anticipates a revenue loss of approximately ₹1 lakh crore in direct taxes due to these reforms.

Benefits for the Middle Class

With no tax liability up to ₹12 lakh, middle-class households will have more disposable income to either spend or invest. This additional cash flow can be directed toward healthcare expenses, education, savings, or lifestyle enhancements, contributing to improved quality of life for families.

Support for Family Financial Goals

The tax savings of up to ₹1.1 lakh for individuals with higher incomes provide families with the financial room to plan for long-term goals. These may include buying a home, securing higher education for children, or investing in retirement funds.

By increasing the tax-free threshold, households are likely to spend more on goods and services, including essential and luxury products. This rise in consumption will have a ripple effect, benefiting industries such as real estate, automobiles, and consumer goods, ultimately contributing to the nation’s GDP growth.

Encouragement for Investments

Lower tax rates leave more room for individuals to invest in various financial instruments such as mutual funds, stocks, and bonds. This encourages long-term wealth creation while contributing to the liquidity and stability of financial markets.

The increased disposable income and reduced tax burden will enable many middle-class individuals to consider entrepreneurial ventures, thus fostering innovation and job creation. With more financial freedom, aspiring entrepreneurs can invest in small businesses and contribute to local economic development.

Financial Inclusion and National Growth

By easing the tax burden on the middle class, the government reinforces its commitment to financial inclusion and national growth. Empowered households can contribute more effectively to the nation’s progress through higher consumption, greater investments, and entrepreneurial activities.

The reforms align with the government’s vision of “Viksit Bharat” (Developed India) by fostering a financially secure and economically vibrant environment. As middle-class families gain more purchasing power and investment opportunities, the foundation for sustainable economic growth becomes stronger.

A Strategic Move Toward Economic Progress

The new tax regime is a strategic move by the government to acknowledge the middle class’s vital role as a pillar of India’s economic growth. By providing significant tax relief, increasing spending power, and creating a favorable investment climate, these changes are poised to reshape the financial landscape of middle-class India. The long-term impact is expected to be transformative, contributing to a prosperous, financially secure, and economically thriving nation.

Read More : Middle Class Get Big Relief As Modi Government Announces Zero Income Tax Till Rs. 12 Lakh

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Budget 2025

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