"Ab Ki Baar ₹12 Lakh Paar" – No Tax Up to ₹12.75 Lakh, Government Waives Lower Tax Slabs in New Regime!

The Indian government has made a historic change in the income tax regime by making annual income up to ₹12.75 lakh tax-free. Find out who benefits, how much tax savings you can get, and key highlights of Budget 2025 in this detailed analysis.

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12.75 Lakh Tax Free

The Union Budget 2025 has brought major relief for taxpayers in India. In a historic move, Finance Minister Nirmala Sitharaman announced that under the new tax regime, individuals earning up to ₹12.75 lakh per year will not have to pay any income tax.

This decision significantly reduces the tax burden on the middle class, salaried professionals, freelancers, and small business owners. The tax system has been simplified, and the government has removed the lower tax slabs, providing major financial relief to millions of Indians.

This article breaks down the details of the new tax regime, explains who benefits the most, and provides insights into other major budget announcements.

Major Changes in Income Tax Slabs for FY 2025-26

The new tax regime introduced in Budget 2025 simplifies the tax structure and eliminates tax for lower-income earners.

New Income Tax Slabs (FY 2025-26, New Regime)

Annual Income (₹)	Tax Rate (%)
0 – 12.75 lakh	0% (No Tax)
12.75 – 15 lakh	10%
15 – 20 lakh	20%
Above 20 lakh	30%

Key Changes in the Tax Structure

✅ Income up to ₹12.75 lakh is completely tax-free – a huge jump from the previous ₹7 lakh limit.
✅ Lower tax slabs (5% and 10%) have been removed, making taxation simpler.
✅ Higher tax exemption results in more disposable income for middle-class earners.

📌 Example Scenarios:

If your annual income is ₹12.75 lakh, you pay ₹0 tax.
If you earn ₹14 lakh, you only pay tax on ₹1.25 lakh at 10%, resulting in a tax of ₹12,500.
If you earn ₹18 lakh, you pay tax on ₹3 lakh at 20%, which is ₹60,000.

This tax reform ensures that millions of middle-class taxpayers will have more money in their hands.

Who Benefits the Most from the New Tax Slabs?

The new income tax structure is designed to benefit:

1️⃣ Middle-Class Salaried Professionals

Government employees and private sector workers will enjoy higher tax savings.
More disposable income to spend on essentials, savings, and investments.

2️⃣ Self-Employed and Freelancers

Freelancers and small business owners who earlier had to pay tax at 5% and 10% slabs will now enjoy full tax exemption on income up to ₹12.75 lakh.

3️⃣ Startups and Small Business Owners

Easier business operations with reduced tax liability.
More room to invest in growth and expansion.

4️⃣ Non-Resident Indians (NRIs)

NRIs earning taxable income in India will benefit from lower tax burdens.

📌 The biggest advantage? This tax system is much simpler than the old regime, making tax filing easier for everyone.

Top 5 Key Announcements in Budget 2025

Besides the tax slab changes, the Union Budget 2025 introduced several key financial and economic policies.

1️⃣ Higher Standard Deduction for Salaried Employees

✅ The standard deduction limit is now ₹75,000 (previously ₹50,000).
✅ More savings for salaried individuals and pensioners.

2️⃣ Home Loan Tax Benefits Increased

✅ Bigger tax deductions on home loan interest to encourage homeownership.
✅ Lower interest rates for first-time homebuyers under PM Awas Yojana.

3️⃣ Lower Corporate Tax for Small Businesses

✅ SMEs (Small and Medium Enterprises) now pay 22% corporate tax (previously 25%).
✅ Encourages growth and investments in startups and small businesses.

4️⃣ Startups Get 5-Year Tax Holiday

✅ Startups registered before 2030 will get tax exemptions for 5 years.
✅ Boosts entrepreneurship, innovation, and economic growth.

5️⃣ Green Energy & EV Subsidies Increased

✅ Tax incentives for electric vehicle (EV) purchases.
✅ More funding for renewable energy projects (solar, wind, and hydrogen energy).

📌 Overall, this budget focuses on tax savings, infrastructure growth, and economic development.

Additional Key Announcements in Budget 2025

📌 Farmers to Get Higher MSP (Minimum Support Price) on Crops.
📌 ₹11.2 trillion allocated for infrastructure projects.
📌 Government to promote solar and renewable energy with tax reliefs.
📌 Pharmaceutical sector to receive incentives for drug production and research.

📌 A clear shift towards boosting India’s self-reliance and long-term economic stability.

How Will Tax Exemptions Impact the Economy?

A major question is: How will the government balance its revenue with such a large tax exemption?

👉 Revenue Loss: With ₹12.75 lakh income now tax-free, the government will lose nearly 15% of its previous income tax collections.
👉 Economic Growth: Higher disposable income leads to more spending and demand, which can boost GDP.
👉 GST & Indirect Tax Focus: The government may increase reliance on GST and indirect taxes to compensate for lost revenue.

📌 Experts believe this move is aimed at increasing domestic consumption and economic activity.

Impact on Stock Market & Investments

📉 Stock Market Reaction After Budget Announcement:
✅ IT, Pharma, and Startup stocks saw gains due to tax exemptions.
✅ Real estate stocks surged with higher home loan tax benefits.
✅ Banking stocks dipped slightly due to concerns over government revenue losses.

📌 Overall, a balanced impact on the Indian stock market.

Frequently Asked Questions (FAQs)

1️⃣ When will the new tax slabs come into effect?

📌 From April 1, 2025, as per the Finance Ministry’s statement.

2️⃣ Who benefits the most from the new tax system?

📌 Salaried employees, freelancers, and small business owners will see the biggest tax savings.

3️⃣ Will the old tax regime still be available?

📌 Yes, taxpayers can choose the old regime if they prefer tax deductions.

4️⃣ Does the budget support digital and fintech industries?

📌 Yes, major tax incentives have been given to startups and digital payment companies.

5️⃣ How will the budget affect India’s economy in the long run?

📌 More disposable income for citizens, increased spending, and long-term economic stability.

Conclusion

The Union Budget 2025 is one of the most significant budgets in India’s history. The government’s decision to exempt tax on income up to ₹12.75 lakh is a game-changer for middle-class earners and small businesses.

📌 This move puts more money into people’s hands, boosts economic activity, and simplifies tax compliance.

However, questions remain about how the government will manage the revenue loss, and whether increased GST collections and indirect taxation will balance the economy.

✅ Is this the best tax reform for India’s middle class? Let us know your thoughts! 🚀

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“Ab Ki Baar ₹12 Lakh Paar” – No Tax Up to ₹12.75 Lakh, Government Waives Lower Tax Slabs in New Regime!