Union Budget 2025: Major Tax Breaks for Middle-Income Earners

India's Union Budget 2025 proposes significant tax relief for middle-income earners, with one crore taxpayers exempt from taxes. Finance Minister Nirmala Sitharaman introduced a simplified tax regime, raising the tax-free income threshold to Rs 12 lakh. The government aims to boost the economy through increased household savings and investments.

In a landmark move unveiled in the Union Budget 2025, Finance Minister Nirmala Sitharaman announced that one crore middle-income Indian taxpayers will no longer fall under the tax net. Addressing the media post-Budget, the minister highlighted, "One crore people will pay no tax." This was in response to queries regarding the impact of new proposals on taxpayers.

Sitharaman emphasized the government's commitment to responding to public needs, particularly through income tax simplification. She noted that a comprehensive tax simplification effort launched in July has culminated in the finalization of a new bill ready for introduction in Parliament next week. As part of her budget speech, she declared a significant increase in the tax-free income threshold from Rs 7 lakh to Rs 12 lakh, offering substantial relief to middle-income earners.

For salaried taxpayers, this exemption rises to Rs 12.75 lakh, incorporating a Rs 75,000 standard deduction. The minister underscored that the new regime simplifies tax processes with a focus on middle-class benefits. Back in 2014, the exemption limit was just Rs 2.2 lakh, progressively increasing to Rs 7 lakh before this announcement.

Finance Secretary Tuhin Kanta Pandey reiterated the boon for middle-income taxpayers, expecting many will benefit. These tax concessions mean the government will forfeit around Rs 1 lakh crore in direct taxes and Rs 2600 crore in indirect taxes, but anticipates economic growth through stimulated consumption, savings, and investment. The 2024 Budget had already flagged a revision of the Income-tax Act, aimed at minimizing litigation and clarifying tax laws.

(With inputs from agencies.)