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Budget 2025 brings new tax slabs, increasing savings and boosting economic growth. Find out how these changes impact you.
The Union Budget 2025 that Finance Minister Nirmala Sitharaman presented on February 1, 2025, has brought a significant reform to the income tax structure towards the comfort of the middle class for participative economic growth. Such a change aims to increase disposable incomes and boost consumption and investment across the different sectors. Further, let us see the budget highlights of income tax.
What are the Latest Tax Slabs Announced in Budget 2025?
Tax reduction helps the economy grow while giving citizens more money to spend. When families and individuals pay less tax, they can shop more, invest, or make savings in the future. Moving ahead, let us see the budget highlights related to income tax and various slabs:
Budget 2024 Tax Slabs
- Old Tax Regime
| Income Slab (In Rs. Lakh) | Tax Slab |
| Up to 2,50,000 | NIL |
| 2,50,000 – 5,00,000 | 5% |
| 5,00,000 – 10,00,000 | 20% |
| 10,00,000 and above | 30% |
- New Tax Regime
| Income Slab (In Rs.Lakh) | Tax Slab |
| Up to 3,00,000 | NIL |
| 3,00,000 – 7,00,000 | 5% |
| 7,00,000 – 10,00,000 | 10% |
| 10,00,000 – 12,00,000 | 15% |
| 12,00,000 – 15,00,000 | 20% |
| 15,00,000 and above | 30% |
Budget 2025 Tax Slabs
In the latest budget, the old regime remains unchanged, but there are changes to the new regime, which are as follows:
- New Tax Regime
| Income Slab (In Rs.Lakh) | Tax Slab |
| Upto 4,00,000 | NIL |
| 4,00,000-8,00,000 | 5% |
| 8,00,000-12,00,000 | 10% |
| 12,00,000-16,00,000 | 15% |
| 16,00,000-20,00,000 | 20% |
| 20,00,000-24,00,000 | 25% |
| 24,00,000 and above | 30% |
What is the Impact on Citizens From The New Slab?
With the reduction in the tax slab, additional spending will be generated that will help businesses grow and encourage banks to receive more deposits, supporting the launch of new companies. Let us see how the budget 2025 tax deduction India will benefit citizens:
- No Tax Up to 12 Lakhs: Under the new tax slabs, individuals do not have to pay tax up to the limit of Rs. 12 Lakh. The tax amount as per the tax slab comes to around Rs. 60,000, but this full amount will be refunded to the taxpayer as a tax rebate in budget 2025. So, it is said that till 12 lakh, there is no tax.
- 1 Crore People Exempt from Income Tax: With the new tax slabs, over 1 crore people will not have to pay income tax. This means they can keep more of their money and save more. Having extra money will give people more financial freedom and spending power.
- Increasing Spending Power: With more money available, people will spend more, which will increase consumption. This higher demand from consumers can help the economy grow. As people buy more, businesses will make more sales, leading to overall growth.
Liberalised Remittance Scheme (LRS) and Its Impact
The Liberalised Remittance Scheme (LRS) allows Indian residents to send money abroad for education, travel, and investments. Currently, Tax Collected at Source (TCS) is applied to foreign remittances through LRS, including:
- Education financed by loans
- Medical treatment/education (other than financed by loans)
- Purchase of overseas tour packages exceeding Rs. 7 lakhs, with rates ranging from 0.5% to 20%.
The Union Budget 2025 has introduced key changes:
- The threshold for TCS has been increased from Rs. 7 lakhs to Rs. 10 lakhs.
- No TCS will be levied on foreign remittances made through education loans taken from specified financial institutions.
This move provides significant relief to students opting for loans for studies abroad, reducing the financial burden on them and their families.
Boost to EVs and Mobile Phone Sectors for Citizens
To promote the electric vehicle (EV) and mobile phone industries, the Budget 2025 has proposed waiving customs duty on:
- 35 additional capital goods used in EV battery manufacturing.
- 28 additional capital goods for mobile phone battery manufacturing.
This initiative is expected to reduce production costs and encourage local manufacturing in our country. This will make EVs and mobile devices more affordable to the local citizen.
Boost to Farmers and Agricultural Sector
The government has identified agriculture as a key engine of growth and introduced the Prime Minister Dhan-Dhaanya Krishi Yojana. This scheme aims to benefit 1.7 crore farmers in 100 districts with low crop production. A total allocation towards the agricultural segment has been made around approx Rs. 1.72 lakh crore which is 12% higher compared to the previous year.
What will be the Impact on the Economy?
Looking at the budget highlights in income tax, the new tax slab and direct tax changes will cost the government about Rs. 1 Lakh crore in revenue. By giving tax relief, especially to salaried people earning up to Rs. 12 Lakh, taxpayers will have more money to spend. This can help increase shopping and boost the economy. However, the government will need to find other ways to get money or depend on economic growth to cover the loss. In the long run, better tax collection, more businesses, and overall economic growth will help balance this loss.
Conclusion
Looking at 2025 budget highlights, tax slab and impact on citizens, this budget focuses on making the economy stronger by giving financial relief and supporting key industries. The government might lose some money at first, but as people spend more and businesses grow, things will improve. More people will invest, and new jobs will be created, helping the economy. This budget may help to build a better future for everyone.
DISCLAIMER: This article is not meant to be giving financial advice. Please seek a registered financial advisor for any investments.
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