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Published 22:08 IST, February 1st 2025

No Tax Till ₹12 Lakh | Modi's Budget Puts Middle Class in Focus to Push Forward India's Growth Story

Union Budget 2025: A taxpayer in the new regime with an income of Rs 12 lakh will get a benefit of `Rs 80,000 in tax. Read big takeaways

Reported by: Digital Desk
Edited by: Surabhi Shaurya
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Under the revised tax slabs, there will be no tax on an income of up to Rs 4 lakh.
Under the revised tax slabs, there will be no tax on an income of up to Rs 4 lakh. | Image: Republic Digital

Budget 2025: In a game-changing move, the Modi 3.0 government in the Union Budget 2025 announced a massive tax relief for the middle class, making income up to ₹12 lakh tax-free. The bold step is set to boost disposable incomes, drive consumption, and accelerate India's economic growth. By easing the financial burden on millions of salaried professionals and small business owners, the government aims to fuel spending and investments, ultimately strengthening the nation’s economic growth. Alongside this tax relief, Bihar has emerged as a key beneficiary of the budget, receiving a special package aimed at infrastructure, industry, and welfare development. 

Finance Minister Nirmala Sitharaman , during her Union Budget 2025 speech, announced that no income tax will be payable on income up to Rs 12 lakh. This limit will be Rs 12.75 lakh rupees for salaried taxpayers counting Rs 75,000 of the standard deduction. She also stated that the new income tax regime (NTR) will be simpler, with a special focus on benefiting the middle class. The announcement from the Finance Minister of this big relief to the middle class was met by a loud thumping of the desks by the treasury benches led by PM Narendra Modi . The finance minister announced a change in income tax slabs and rates across the board, ensuring a more progressive taxation system. 

New Tax Slabs Under The New Tax Regime

Under the new tax slabs income of up to Rs 4 lakh will have to pay Nil tax hiked from Rs 3 lakh. A taxpayer in the new regime with an income of Rs 12 lakh will get a benefit of `Rs 80,000 in tax. "Slabs and rates are being changed across the board to benefit all tax-payers. The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment", said Sitharaman.

How Much Sitharaman Saved You in Taxes?

The exemption can be earned only if a taxpayer takes relief under various sections of the income tax act like Rs 1.5 lakh exemption under section 80CCC, the exemption of Rs 1.5 lakh for paying interest on home loans. 

"To taxpayers up to Rs 12 lakh of normal income (other than special rate income such as capital gains) tax rebate is being provided in addition to the benefit due to slab rate reduction in such a manner that there is no tax payable by them", said Sitharaman.

A person having an income of `Rs 18 lakh will get a benefit of Rs 70,000 in tax. A person with an income of Rs 25 lakh gets a benefit of Rs 1,10,000 under the new tax slabs.

"The total tax benefit of slab rate changes and rebates at different income levels can be illustrated with a few examples, a taxpayer in the new regime with an income of 12 lakh rupees will get a benefit of 80,000 rupees in tax, which is 100% of tax payable as per the existing rates.

A person having an income, a person having an income of 18 lakh rupees will get a benefit of 70,000 rupees in tax, which is 30% of tax payable as per the existing base. A person with an income of 25 lakh gets a benefit of one lakh 10,000 rupees, that is 25% office tax payable as per existing rates," the Finance Minister said.

As a result of these proposals, revenue of about Rs 1 lakh crore in direct taxes and Rs 2600 crore in indirect taxes will be forgone.

Big Bonanza For Bihar

In her Budget speech , Sitharaman proposed to form a Makhana Board in Bihar. Makhana or foxnuts, a nutritious food, is widely produced and consumed in Bihar. Under the One District One Product scheme, Makhana producers have benefited hugely. The Makhana Research Center has been given the status of a national institution, with Makhanas having also received a GI tag.

'Govt's Focus on Garib Youth, Annadata and Naari'

In her initial remark today, Sitharaman said her government's focus would be on Garib, Youth, Annadata and Nari.

"Our economy is the fastest-growing among all major global economies. Our development track record of the past 10 years and structural reforms have drawn global attention. Confidence in India's capability and potential has only grown in this period. We see the next five years as a unique opportunity to realize 'Sabka Vikas', stimulating balanced growth of all regions," she said.  

The Finance Minister highlighted the government's vision of 'Sabka Vikas' (Development for All), aiming for balanced growth across all regions. Under the leadership of Prime Minister Narendra Modi, the government aims to unlock India's full potential and enhance its global standing. 

List of Items Getting Cheaper & Dearer Based on Budget 2024-25

Getting Cheaper (Due to BCD Reduction or Exemption)

  • Drugs & Medicines
  • 36 lifesaving drugs and medicines fully exempted from BCD
    6 lifesaving medicines added to concessional 5% duty list
    37 medicines under new patient assistance programs fully exempted
    Bulk drugs for manufacturing of these medicines exempted/concessional duty
  • Critical Minerals & Metals 
  • Cobalt powder and waste 
    Scrap of lithium-ion battery
    Lead, Zinc, and 12 more critical minerals
  • Textile Machinery
  • Two more types of shuttle-less looms fully exempted
  • Electronic Goods
    BCD on Open Cell and other components reduced to 5%
    BCD on parts of Open Cells (LCD/LED TVs) fully exempted
  • Lithium-ion Battery Manufacturing
    35 capital goods for EV battery manufacturing exempted
    28 capital goods for mobile phone battery manufacturing exempted
  • Shipping & Shipbuilding
    Exemption of BCD on raw materials, components, consumables, and parts for ship manufacturing extended for 10 years
    The same exemption applied to ship-breaking
  • Telecommunication
    BCD on Carrier Grade ethernet switches reduced from 20% to 10%
  • Export Promotion
    Handicrafts: Duty-free input list expanded by 9 more items
  • Leather Sector
    Full BCD exemption on Wet Blue leather for domestic value addition
    Export duty on Crust Leather removed (was 20%)
  • Marine Products
    Frozen Fish Paste (Surimi) BCD reduced from 30% to 5%
    Fish hydrolysate BCD reduced from 15% to 5%
  • Railway MROs
    MRO (Maintenance, Repair & Overhaul) facilities for railway goods now get the same extended export time limit (1 year + 1 year extension) as aircraft and ships

Getting Dearer (Due to BCD Increase)

  • Knitted Fabrics
    BCD revised from "10% or 20%" to "20% or Rs 115 per kg, whichever is higher
  • Electronic Goods
    BCD on Interactive Flat Panel Display (IFPD) increased from 10% to 20%

Agricultural sector and gig economy gets a boost

To boost productivity across the agriculture sector, the Indian government will launch a nationwide program to push high-yielding crops, focusing on the cultivation of pulses and cotton production. Sitharaman said the program will target at least 17 million farmers and raise the limit for subsidized credit offered to them from $3,460 to $5,767.

The government also plans to formally register India's gig workers and ease their access to health care. Sitharaman said the government will issue them identity cards and maintain a national registry that will ensure their inclusion in welfare initiatives.

India’s gig economy could employ more than 23 million people by 2030, according to estimates by government think tank NITI Aayog.

Investments in new startup funds and energy sector

Sitharaman announced a new fund for startups and said the government will provide more money to promote innovation in partnership with the private sector and launch programs to push manufacturing and exports. The share of manufacturing in India's economy is close to 17%, short of its aimed goal of 25%.

The government will infuse more money to increase tourism-led employment in several Indian states and help with building infrastructure and boosting air connectivity to 120 new destinations over 10 years, Sitharaman said.

She also announced the Nuclear Energy Mission to drive India’s transition toward clean energy, with a goal of developing at least 100 GW of nuclear power by 2047.

India Inc Hails 'Bold' Budget With 'Heavy Dose of Reforms'

Industry bodies and corporate leaders said the Budget proposals, especially the slashing of personal income tax rates, will re-energise the economy by lifting the sentiments of the middle class and nudging the private sector to advance its investment plans, amid uncertainty over the global economic outlook and growing concerns due to potential new tariff barriers.

"This is the biggest section of the middle class. It has also significantly reduced the tax burden for incomes up to Rs 24 lakh. We have made a decisive move to a world-class tax system which will be simple, transparent and friendly to taxpayers," he added.

"The Union Budget 2025-26 provides a strong and convincing template for boosting growth and generating jobs, the twin imperatives for our economy today, with targeted interventions towards facilitating inclusive development," CII President Sanjiv Puri said.

The policy choices made to facilitate powerful engines such as agriculture, MSME, investment and exports by way of reforms in six domains, in collaboration with states, is welcome and has been CII's long-standing advocacy, Puri said.

FICCI President Harsha Vardhan Agarwal described it as a comprehensive, inclusive and forward-looking budget that encompasses a heavy dose of reforms, fiscal stimulus and a clear focus on the farm sector, MSMEs, youth and women.

"The Budget proposals will re-energise the economy by lifting the sentiments of the middle class and nudging the private sector to advance its investment plans as demand improves across sectors," he added.

Vedanta Ltd Chairman Anil Agarwal observed that the Budget has hit the perfect note, providing great relief to the middle class by making incomes up to Rs 12 lakh per annum completely tax-free.

Mercedes-Benz India Managing Director & CEO Santosh Iyer said the Budget "will send a strong positive signal to the industry, reinforcing confidence in the 'India Growth Story', paving the way for sustained investment and future expansion".

Updated 22:17 IST, February 1st 2025