Historic Union Budget 2025-26: Major Tax Relief for the Middle Class
Union Budget 2025-26 Overview
New Delhi, January 4, 2026: The Union Budget for 2025-26, presented by Finance Minister Nirmala Sitharaman, is being hailed as a landmark relief package for the middle class. The budget features a complete overhaul of the new tax regime, making it simpler, with lower rates and more appealing options. A significant announcement is that individuals earning up to ₹12 lakh annually will not be subject to income tax.
Focus on the Middle Class
Emphasis on Middle-Class Contributions During her budget speech, the Finance Minister highlighted the crucial role of the middle class in nation-building. Consequently, the government has revised the slabs and rates in the new tax regime to exempt individuals with an average monthly income of up to ₹1 lakh from taxes. With a standard deduction of ₹75,000 for salaried employees, effectively, incomes up to ₹12.75 lakh will be tax-free.
New Tax Slabs for FY 2025-26
Revised Tax Slabs
- Income up to ₹4 lakh: 0% tax
- Income from ₹4 lakh to ₹8 lakh: 5%
- Income from ₹8 lakh to ₹12 lakh: 10%
- Income from ₹12 lakh to ₹16 lakh: 15%
- Income from ₹16 lakh to ₹20 lakh: 20%
- Income from ₹20 lakh to ₹24 lakh: 25%
- Income above ₹24 lakh: 30%
Additional Key Reliefs
Furthermore, the rebate under Section 87A has been increased to ensure zero tax for incomes up to ₹12 lakh. Experts believe these changes will enhance the savings and spending capacity of the middle class, thereby boosting the economy.
Other Major Reliefs Include:
- Simplification of TDS/TCS regulations for easier compliance.
- No changes to the old tax regime, but the new regime has been made so attractive that most taxpayers are likely to opt for it.
- Simplification of capital gains tax, with a uniform rate of 12.5% on long-term capital gains.
Impact and Reactions
Projected Benefits Approximately 1 crore taxpayers are expected to benefit from this budget. An individual with an income of ₹12 lakh could save up to ₹80,000 compared to previous provisions. Economists have dubbed this the 'Middle-Class Budget,' which is anticipated to stimulate consumption and investment. The government estimates that these relief measures will result in a revenue loss of ₹1 lakh crore, but they are expected to inject new momentum into the economy.