Sun Feb 02 08:27:41 UTC 2025: ## Income Tax Relief for Middle Class in India’s New Budget

**New Delhi, [Date]** – India’s Finance Minister Nirmala Sitharaman announced significant changes to the income tax system, offering substantial relief to the middle class and those in higher income brackets. The most notable change is a significant increase in the rebate limit under the New Tax Regime (NTR), from ₹7 lakh to ₹12 lakh. This means individuals with an annual taxable income up to ₹12 lakh (approximately $145,000 USD) will not pay any income tax under the NTR.

The government hopes this will incentivize a shift away from the older, more complex tax regime (OTR) which offers numerous exemptions but requires more complex calculations. The changes to the NTR also include tweaked tax slabs benefiting higher earners. For example, the tax rate for income between ₹12 lakh and ₹16 lakh has been reduced from 20% to 15%, resulting in considerable savings for this group. Further reductions in tax rates for income brackets between ₹16 lakh and ₹24 lakh will also offer substantial tax benefits.

While those earning up to ₹12 lakh will enjoy zero tax liability, the minister cautioned that exceeding this limit, even slightly, results in a substantial tax burden. A person earning ₹12.1 lakh would pay approximately ₹61,500 in taxes, highlighting the sharp increase at the threshold. Tax parity between the NTR and the OTR (considering take-home pay) is only achieved at approximately ₹12.71 lakh.

While the OTR still offers advantages for those claiming extensive deductions (such as high house rent allowances), the improvements to the NTR are expected to make it a more attractive option for a large portion of taxpayers, even if marginally more expensive in some cases. The simplification offered by the NTR outweighs the minor tax differences in many instances, removing the hassle of navigating complex deduction claims. The changes also aim to reduce the incentive for making investments solely for tax benefits.

The budget changes are projected to significantly boost disposable income for a substantial portion of the Indian population, particularly the middle class, signaling a renewed focus on economic relief and simplicity in the country’s tax system.

Read More