Finance Minister Nirmala Sitharaman on Saturday introduced the revised tax slab in the new tax regime in Union Budget 2025. Revised income tax rates have been introduced under the new tax slab, and those earning up to Rs 12 lakh annually have been exempted from paying any tax.
Union Budget 2025, Income Tax rates: In a major relief for middle-class taxpayers, Finance Minister Nirmala Sitharaman on Saturday introduced the revised tax slab in the new tax regime in Union Budget 2025. Under the new tax slab, people who earn up to Rs 12 lakh annually have been exempted from paying any income tax, while those earning Rs Rs 20,00,000 to Rs 24,00,000, will have to pay 25% income tax.
“The middle class provides strength to the economy. In recognition of their contribution, we have periodically reduced the tax burdens. I am now happy to announce that there will be no income tax up to an income of Rs 12 lakh,” the Finance Minister said, while also introducing a new tax slab under which those earning Rs 20 lakh to Rs 24 lakh annually, will be taxed 25% on their income.
Tax slab under new tax regime for FY 2025-26:
| Income | Tax payable |
| Up to Rs 4,00,000 | Nil |
| Rs 4,00,001 to Rs 8,00,000 | 5% |
| Rs 8,00,001 to Rs 12,00,000 | 10% |
| Rs 12,00,001 to Rs 16,00,000 | 15% |
| Rs 16,00,001 to Rs 20,00,000 | 20% |
| Rs 20,00,001 to Rs 24,00,000 | 25% |
| Above Rs 24,00,000 | 30% |
The Finance Minister announced tax rebate under 87A for taxpayers who earn up to Rs 12 lakh in financial year 2025-26, meaning these individuals will not have to pay any income tax under the new tax regime. The rebate also applies to those earning above Rs 12 lakh annually, such as salaried persons who have annual income of Rs 12.75 lakh are also covered under the rebate due to the Rs 75,000 standard deduction rule.
New tax regime vs old tax regime
Here are the tax slabs applicable under the old tax regime:
| Income | Tax Payable |
| Up to Rs 3 lakh | Nil |
| Rs 3 lakh to Rs 7 lakh | 5% |
| Rs 7 lakh to Rs 10 lakh | 10% |
| Rs 10 lakh to Rs 12 lakh | 15% |
| Rs 12 lakh to Rs 15 lakh | 20% |
| Above Rs 15 lakh | 30% |
New tax slab for Rs 15 lakh and above
Notably, under the old tax regime, those earning above Rs 15 lakh annually had to pay 30% income tax, but the new tax regime has divided this layer of taxpayers into three sections with separate tax rates applicable to each section.
Taxpayers who earn Rs 16,00,001 to Rs 20,00,000 have to pay 20% tax on their income, Rs 20,00,000 to Rs 24,00,000 has a 25% tax rate, while those earning above Rs 24,00,000 have to pay 30% income tax.