Understanding the Tax Exemption Limit of ₹12 Lakh in the Union Budget 2025

In the Union Budget 2025, Finance Minister Nirmala Sitharaman introduced significant tax relief for middle-class taxpayers. Under the new tax regime, individuals with annual earnings up to ₹12 lakh are exempt from income tax. For salaried taxpayers, this exemption extends to ₹12.75 lakh, factoring in a standard deduction of ₹75,000.

Key Highlights in Union Budget 2025:

• Increased Tax Rebate: The tax rebate limit has been raised to ₹12 lakh, meaning individuals earning ₹1 lakh per month will pay zero tax.
• Basic Exemption Limit: The basic exemption limit has been increased from ₹3 lakh to ₹4 lakh, reducing the tax burden for many individuals.
• Standard Deduction: Salaried individuals can benefit from a standard deduction of ₹75,000, effectively increasing the tax-free income limit to ₹12.75 lakh.

Tax Slabs Under the New Regime:

These changes aim to boost disposable income and enhance financial flexibility for the middle-class workforce.

Additional Reforms:

• Tax Deduction at Source (TDS): The TDS rates will be rationalized, and the limit for tax deduction for senior citizens will be doubled to ₹1 lakh.
• Updated Return Filing: The time limit to file the updated return has been extended from two years to four years, providing taxpayers with more flexibility.

Important Considerations:

• Special Rate Income: Incomes such as capital gains, lottery winnings, and other special rate incomes are not eligible for the new tax rebate and remain taxable even if the total income is below ₹12 lakh.
• Filing Requirements: Individuals earning up to ₹12 lakh (excluding special rate income) are required to file their Income Tax Returns (ITR) to claim the rebate.

These reforms are designed to stimulate economic growth by increasing consumer spending and investment, thereby contributing to a more robust economy.

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