Nirmalasitharaman Unveils Tax Revamp in Budget
The new tax regime offers benefits for income up to Rs 12 lakh, with options for higher-income earners to choose between the new and old regimes. The budget aims to boost economic growth, promote economic growth, and reduce the government's deficit, with potential benefits for investment ratings and borrowing costs.
Indian Finance Minister Nirmalasitharaman has introduced a new tax regime in the Budget 2025, offering significant benefits for individuals with income up to Rs 12 lakh, while also providing options for higher-income earners to choose between the new and old tax regimes based on their financial profiles.
The new tax regime is designed to boost economic growth and counter slowing growth among the middle class. The measures include raising income tax exemption limits to Rs 1.2 million, making earnings entirely tax-free, and tweaking income tax slabs to leave more money in the hands of the middle class. Additionally, the budget aims to increase state-led infrastructure spending and launch a Nuclear Energy Mission to promote economic growth.
The new tax regime deducts deductions and HRA, resulting in higher tax incidence beyond the Rs 12 lakh level, making the old regime a better choice for incomes up to Rs 15.75 lakh if certain conditions are met. However, above Rs 20 lakh, the new regime shows substantial savings over the old. Taxpayers with higher taxable income must follow the slab-wise taxation process, which breaks down the total income into different slabs, each taxed at respective rates.
The government provides a rebate, which increases the exemption limit for a salaried person with a total income of Rs 12 lakh to Rs 12,75,000. The calculation of tax benefits is based on the slab-wise taxation process, and taxpayers may choose between the new and old regimes based on their financial profile. The old regime allows exemptions but has higher rates, making it more beneficial for certain individuals to opt for the old regime.
In conclusion, the new tax regime introduced in the Budget 2025 offers significant benefits for individuals with income up to Rs 12 lakh, while also providing options for higher-income earners to choose between the new and old tax regimes. The measures aim to boost economic growth, promote economic growth, and reduce the government's deficit, which could lead to potentially better investment ratings and lower borrowing costs for the country.
