Sun Feb 02 10:59:20 UTC 2025: **India Announces Significant Income Tax Cuts in Union Budget 2025**

NEW DELHI, Feb 1, 2025 – Finance Minister Nirmala Sitharaman unveiled sweeping changes to India’s income tax system in the Union Budget 2025, significantly reducing the tax burden for the middle class. The headline announcement: zero income tax for individuals earning up to ₹12 lakh per annum under the new tax regime. This effectively raises the threshold to ₹12.75 lakh when factoring in the existing ₹75,000 standard deduction.

The changes, aimed at boosting household consumption and aggregate demand, also revise tax slabs. Individuals earning up to ₹4 lakh will pay no income tax, while the highest tax rate of 30% applies only to incomes exceeding ₹24 lakh. The government estimates this will result in a revenue loss of approximately ₹1 lakh crore in direct taxes and ₹2,600 crore in indirect taxes.

Minister Sitharaman cited examples illustrating the tax benefits: a person earning ₹12 lakh will save ₹80,000 (100% of their previous tax liability), while someone earning ₹18 lakh will save ₹70,000 (30% of their previous tax liability).

Experts have welcomed the move. Akhil Chandna, partner at Grant Thornton Bharat, believes the increased disposable income will stimulate spending, ultimately benefiting the government. Poorva Prakash, partner at Deloitte India, noted that the revisions enhance the attractiveness of the new tax regime compared to the older system with its deductions and exemptions, simplifying tax administration for employers.

This marks the fourth revision to income tax limits under the Narendra Modi administration, following increases in 2014 (₹2.5 lakh), 2019 (₹5 lakh), and 2023 (₹7 lakh).

Further measures announced include rationalizing tax deducted at source (TDS) and tax collected at source (TCS) structures by reducing rates and thresholds, increasing the TDS limit on interest for senior citizens to ₹1 lakh (double the previous amount), raising the TDS threshold for rental income to ₹6 lakh, and increasing the TCS threshold for remittances under the Liberalised Remittance Scheme to ₹10 lakh. Crucially, TCS on educational remittances will be removed. The government aims to improve compliance through these streamlining measures.

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