No income tax up to ₹12 lakh, middle-class key to growth: FM

Union Minister for Finance Nirmala Sitharaman, presenting the Union Budget 2025-26 in Parliament today, announced a slew of Direct Tax reforms to provide benefits to the middle class. The FM says there will be no income tax payable up to a total income of ₹12 lakh (i.e. average income of ₹1 lakh per month other than a special rate income such as capital gains) under the new income tax regime.

"Democracy, demography and demand are the key support pillars in our journey towards Viksit Bharat. The middle class provides strength for India’s growth. 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," says the finance minister.

This limit will be ₹12.75 lakh for salaried taxpayers, due to a standard deduction of ₹75,000, she says. The FM says slabs and rates are now being changed across the board to benefit all taxpayers. "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."

Additionally, rationalising TDS/TCS, the FM says the limit for a tax deduction on interest for senior citizens will be doubled from the present ₹50,000 to ₹1 lakh. Similarly, the proposals include the annual limit of ₹2.40 lakh for TDS on rent to be increased to ₹6 lakh.