Union Budget 2025 Updates: Modi’s middle-class outreach makes income up to Rs 12.75 lakh tax-free

Finance Minister Nirmala Sitharaman on Saturday said that the changes and measures proposed in the Union Budget 2025 were a response to the needs of Indian citizens and had nothing to do with US President Donald Trump’s tariff threats.

When asked if the income tax rejig and changes in customs duty were proposed as a consequence of Trump’s tariff threats, Sitharaman said, “We responded to the voice of the people and therefore we have given this (income tax relief).”

The government has put “substantial amount of money” in hands of people through rejig of I-T slabs in the Budget and an additional 1 crore people will pay no tax due to hike in tax rebate to Rs 12 lakh per annum, Finance Minister Nirmala Sitharaman said on Saturday.

The  2025-26 Budget  hikes the tax rebate available to individual taxpayer to Rs 12 lakh from next fiscal, from Rs 7 lakh currently.

“One crore more people will pay no income tax due to hike in rebate to Rs 12 lakh,” Sitharaman said at the post-Budget press conference.

The overall benefit for each income class under the new tax regime compared to the old one can be derived by summing up the benefit of rate/slab (column 4) and the rebate benefit (column 5).

For income classes up to Rs 12 lakh, the overall benefit is substantial due to the combined effect of lower tax rates and significant rebates. For instance, individuals earning Rs 8 lakh, Rs 9 lakh, and Rs 10 lakh will save Rs 30,000, Rs 40,000, and Rs 50,000, respectively, in taxes under the new regime.

The maximum total benefit of Rs 80,000 is at the Rs 12 lakh income level. Beyond Rs 12 lakh, while the rebate benefit is unavailable, individuals earning between Rs 13 lakh and Rs 25 lakh still experience savings ranging from Rs 25,000 to Rs 1,10,000, attributed solely to reduced tax rates.

This demonstrates that the new regime has been designed to incentivise taxpayers across all income categories, particularly those in the lower and middle-income brackets.

The new regime eliminates most deductions, such as for investments in ELSS, insurance, and house rent, in exchange for lower tax rates and rebates.

For those in the Rs 8 lakh to Rs 12 lakh range, the new regime is likely more advantageous due to the rebate benefits and lower effective taxes.

However, individuals with incomes exceeding Rs 13 lakh, especially those using multiple tax-saving instruments, should carefully assess their tax liability under both regimes.

If your deductions under the old regime exceed the benefits of reduced rates under the new regime, sticking to the old regime may be preferable.

However, experts suggest this is unlikely to be the case. “The gap between the tax payable under the new and old tax regimes is so vast that it effectively ends the old tax regime. The new tax regime is the most advantageous option for every taxpayer. For instance, a salaried taxpayer earning Rs. 25 lakhs annually will save Rs. 1.24 lakhs by choosing the new tax regime over the old one,” Naveen Wadhwa, Vice President, Taxmann said.

It’s advisable to consult a financial advisor to make an informed decision.

When asked how many taxpayers will now be exempt from paying income tax now that that particular tax cut has been extended to annual income of Rs 12 lakh from Rs 7 lakh, she said the number is approximately 1 crore people.

Read more about this here .

“The government’s continued push for affordable housing, coupled with the Rs 15,000 crore allocation under SWAMIH Fund 2, is a commendable step towards ensuring project completion and reviving stalled developments. These measures will not only enhance housing affordability but also instill confidence in homebuyers and developers alike,” said Vikas Garg, Joint Managing Director, Ganga Realty.

Saransh Trehan, Managing Director, Trehan Group, pointed out that “key industry demands, such as industry status for the real estate sector and a streamlined single-window clearance system, remain unaddressed. These reforms are crucial to enhancing ease of doing business, expediting project approvals, and ensuring faster delivery of homes.”

“Key industry demands, such as industry status for the real estate sector and a streamlined single-window clearance system, remain unaddressed. These reforms are crucial to enhancing ease of doing business, expediting project approvals, and ensuring faster delivery of homes,” Shishir Baijal, Chairman and Managing Director, Knight Frank India said.

He appreciated efforts towards boosting affordable housing, though.

Disability rights organisations have voiced strong criticism of this year’s Union Budget, accusing the government of neglecting the needs of India’s disabled population.

Although there was a slight increase in the overall allocation for the Department of Empowerment of Persons with Disabilities (DEPwD), activists argue that it remains grossly inadequate.

The DEPwD received a total allocation of Rs 1,275 crore, which is seen as only a modest increase in funding.

The National Platform for the Rights of the Disabled (NPRD) expressed its “strong protest” against what it describes as the Modi government’s ongoing disregard for disabled citizens.

When asked if the government is drawing the curtain on the Sovereign Gold Bond scheme, since there have been no new tranches issues in recent times, FM Nirmala Sitharaman said, “In a way, yes”.

A finance ministry official elaborated that “One of the purpose of SGB was to raise money from the market. Past experience has been that this is rather expensive for the government to raise money in this way.” This is why new SGB issuances are on hold at the moment. However, the official said that if the SGB scheme is formally shut down, there will be a notification for it.

During the press conference, FM Nirmala Sitharaman was asked if the old tax regime is finally being phased out with the new tax regime 2025 offering such a vast benefit in terms of tax relief. The Finance Minister dismissed that speculation, stating “I would have said it (in the Budget speech) if that was the case”.

Tuhin Kanta Pandey, the Finance Secretary elaborated on this, stating that 75 per cent of taxpayers have already moved to the New Tax Regime. With the current tax slab relief announced in Budget 2025, the government expects almost everyone to move to the New Tax Regime, even though it is not being phased out just yet.

The government has said that they expect that the money the government has foregone in terms of collecting income tax would come back into the economy as people have more to spend on their consumption and investments.

FM Sitharaman said Budget 2025 proposes to give back the money in the hands of people who deserve to get it.

Finance Minister Niramala Sitharaman introduced several initiatives for poll-bound Bihar as she presented the 2025-2025 Union Budget. Sitharaman laid out the vision of Prime Minister Narendra Modi’s government as the country heads towards the next financial year.

The initiatives introduced in the budget include the establishment of a Makhana Board, National Institute of Food Technology, Entrepreneurship and management, greenfield airports, etc. In addition to this, Sitharaman also proposed the expansion of IIT Patna, so that more students could be admitted to the institution along with the West Kosi canal project in Mithilanchal.

Interestingly, these initiatives were proposed in the parliament as the state is scheduled to conduct its Assembly election this year. Bihar has remained a politically contentious state for a very long time, with the alliance shifting quite often.

The 30-share BSE Sensex closed at 77,505.96, up a marginal 0.01 per cent from yesterday’s closing figure. Zomato, whose stock was up 7.17 per cent, was the top gainer.

The broader Nifty 50 index, on the other hand, closed at 23,482.15, down 0.1 per cent from the previous close. BEL, whose stock was down 4.1 per cent, was the biggest laggard.

1. Sitharaman has announced that 10,000 new seats will be added in medical colleges and hospitals across the country in the coming year.
2. This initiative is part of the Centre’s broader plan to expand medical seats by 75,000 over the next five years.
3.  Student enrollment in 23 IITs has doubled over the past decade. To accommodate this surge, additional infrastructure will be developed in five IITs established after 2014, creating space for 6,500 more students. These include IIT Palakkad, Goa, Bhilai, Jammu, Dharwad, and Tirupati.
4. Sitharaman announced that the government will provide 10,000 PM Research Fellowships for students in IITs and IISc Bangalore.
5. In a major push to integrate technology into education, Sitharaman revealed plans to set up three Centres of Excellence in Artificial Intelligence (AI). With a total allocation of Rs 500 crore, this initiative aims to drive AI-led advancements in learning and skill development.

Read more about it here .

Rebate is the deduction from tax which is available to tax payers having income upto Rs. 12 Lacs in the new regime. Based on the proposal in Budget 2025, the rebate benefit for each income class is as follows:

Income of Rs 8 lac: Rs 20,000 rebate
Income of Rs 9 lac: Rs 30,000 rebate
Income of Rs 10 lac: Rs 40,000 rebate
Income of Rs 11 lac: Rs 50,000 rebate
Income of Rs 12 lac: Rs 60,000 rebate
Income of Rs 13 lac and above: No rebates
The rebate benefit applies only up to Rs 12 lac income.

Rebate is not available on income from capital gains or lotteries or any other income on which special rate has been provided in the Act. It is available only on the tax payable as per slabs under section 115BAC.

Yes, a standard deduction of Rs. 75,000 is available to a tax payer in the new regime. Therefore, a salaried tax payer will not be required to pay any tax where his income before standard deduction is less than or equal to Rs 12,75,000.

Standard deduction of Rs. 50,000 is available in old regime.

Addressing the nation after the presentation of Budget 2025, PM Modi said, “Today is an important milestone in India’s development journey. This is the budget of aspirations of 140 crore Indians. This is a budget that fulfils the dreams of every Indian. We have opened many sectors for the youth. The common citizen is going to drive the mission of Viksit Bharat.”

He called the Budget a “force multiplier”. Read more about his views on this “Historic people’s Budget” here .

Watch PM Modi’s remarks on Budget 2025 presented by FM Nirmala Sitharaman today.

#BudgetOnFirstpost: Indian Prime Minister Narendra Modi has praised Union Budget 2025-26 presented by Finance Minister Nirmala Sitharaman in the Lok Sabha today. https://t.co/Wb7HP9ho9l

— Firstpost (@firstpost) February 1, 2025

“The issue of reducing private consumption was looming large which could have wider ramifications if not addressed early. With that the government focused on providing disposable income and boost consumption. The highlight of this budget is clearly the reduction in the Income Tax burden on the middle-class which will bear no tax up to an income of INR 12 Lakh fundamentally increasing disposable incomes and boosting consumption,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

“The easing of tax norms, particularly the exemption of income tax on earnings up to Rs 12 lakh, is a positive step. This move is expected to boost liquidity, enhance consumer spending, and stimulate demand, especially in the FMCG sector, which has been witnessing sluggish growth in recent quarters,” Indraneel Chitale, Managing Partner, Chitale Bandhu Mithaiwale said.

At 1:40 pm IST, BSE Sensex was down over 110 points, hovering below the 77,400 mark.

The Indian stock market remained in the negative territory, although recoverign swiftly from the day’s low.

Priyanka Chaturvedi, an MP from Shiv Sena (UBT) praised the Union Budget for offering relief to the middle class. “It’s a victory of the middle class; mainly because of them (BJP in Lok Sabha elections) being limited to 240 seats. In the last 10 years, the middle class had this demand – today they have been heard and hence I welcome that (no income tax on income of up to Rs 12 lakhs).”

However, she took a swipe at the government for major announcements on Bihar, which is set to go to elections soon. “Second thing, Bihar must be thinking if it can have an election every year…” she said.

Watch her full comment here:

#WATCH | #UnionBudget2025 | Shiv Sena (UBT) MP Priyanka Chaturvedi says, "It's a victory of the middle class; mainly because of them (BJP in Lok Sabha elections) being limited to 240 seats. In the last 10 years, the middle class had this demand - today they have been heard and… pic.twitter.com/8cCe8IrqTq

— ANI (@ANI) February 1, 2025

We asked Adil Ladha, Partner at Saraf and Partners, if insurance premiums– for life, health or home insurance– would get cheaper after this Budget.

Here’s his response:

“Certain tax law changes announced in the Budget may indirectly impact the operational costs of insurance companies (for instance the reduction of TDS for an insurance commission) which reductions could lead to reduction of insurance premiums. However, market forces and insurance provider decisions would drive the change as there don’t seem to be any direct measures for reduction of premiums.”

We asked Adil Ladha, Partner at Saraf and Partners, if insurance premiums– for life, health or home insurance– would get cheaper after this Budget.

Here’s his response:

“Certain tax law changes announced in the Budget may indirectly impact the operational costs of insurance companies (for instance the reduction of TDS for an insurance commission) which reductions could lead to reduction of insurance premiums. However, market forces and insurance provider decisions would drive the change as there don’t seem to be any direct measures for reduction of premiums.”

Taking a dig at the Centre over the Union Budget, the Congress on Saturday said while Finance Minister Nirmala Sitharaman spoke of four engines of development, the Budget was “completely derailed”.

In her Saturday budget speech, Sitharaman said agriculture, MSME, investments and exports are the four power engines of development.

Congress general secretary in-charge communications Jairam Ramesh said, “The FM spoke of 4 engines: Agriculture, MSMEs, Investment, and Exports. So many engines that the Budget has been completely derailed.” In another post, he said, “The BJP led by Arun Jaitley successfully sabotaged the Civil Liability for Nuclear Damage Act, 2010 that international companies wanted when Dr. Manmohan Singh was PM. Now to appease Mr. Trump, the FM announces that the Act will be amended.”

1. Addition of 36 life saving drugs to be added in list of drugs exempt from customs duty
2. Full exemption and concessional duty for manufacturing life-saving cancer drug
3. Daycare cancer centres to be developed in every district