New Delhi: “The middle class provide strengths to the economy. In recognition of their contribution, we have periodically reduced the tax burdens. I am now happy to announce that there will be no income tax up to an income of Rs 12 lakhs,” said, Union Finance Minister Nirmala Sitharaman today during her Budget Speech.

In her speech, the finance minister said, “Democracy, Demography and Demand are the key support pillars in our journey towards Viksit Bharat. The middle class provides strength for India’s growth. This Government under the leadership of Prime Minister Modi has always believed in the admirable energy and ability of the middle class in nation building. In recognition of their contribution, we have periodically reduced their tax burden. Right after 2014, the ‘Nil tax’ slab was raised to 2.5 lakh, which was further raised to 5 lakh in 2019 and to ` 7 lakh in 2023. This is reflective of our Government’s trust on the middle-class tax payers.”

“I am now happy to announce that there will be no income tax payable upto income of 12 lakh (i.e. average income of 1 lakh per month other than special rate income such as capital gains) under the new regime. This limit will be 12.75 lakh for salaried tax payers, due to standard deduction of 75,000. 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,” she added.

In the new tax regime, FM proposed to revise tax rate structure as follows: 

“To tax payers upto `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. The total tax benefit of slab rate changes and rebate at different income levels can be illustrated with examples. A tax payer in the new regime with an income of ` 12 lakh will get a benefit of ` 80,000 in tax (which is 100% of tax payable as per existing rates). A person having income of ` 18 lakh will get a benefit of ` 70,000 in tax (30% of tax payable as per existing rates).
A person with an income of ` 25 lakh gets a benefit of ` 1,10,000 (25% of his tax payable as per existing rates),” the FM further said. 

A few examples for calculation of tax benefit are given in the table below as per the annexure to the budget speech: