Union Budget 2025-26: Tax Relief for the Middle Class

The Union Budget for 2025-26 has been presented with a strong emphasis on supporting the middle class. Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman, reaffirmed the government’s commitment to the philosophy of “trust first, scrutinize later.” This year’s budget aims to ease the tax burden on common taxpayers while promoting economic growth. The proposed changes in tax slabs and rates are designed to benefit a wide range of income earners, particularly those in the middle-income bracket.

Key Changes in Tax Structure

The Finance Minister announced significant changes to the income tax structure. Under the new regime, individuals earning up to Rs. 12 lakh will not have to pay any income tax. This threshold is slightly higher for salaried taxpayers, who will benefit from a standard deduction of Rs. 75,000, raising their tax-free income limit to Rs. 12.75 lakh. This move is expected to provide substantial relief to middle-class families, allowing them to retain more of their earnings.

The new tax rate structure is as follows:

  • 0-4 lakh rupees: Nil
  • 4-8 lakh rupees: 5%
  • 8-12 lakh rupees: 10%
  • 12-16 lakh rupees: 15%
  • 16-20 lakh rupees: 20%
  • 20-24 lakh rupees: 25%
  • Above 24 lakh rupees: 30%These changes aim to simplify the tax process and make it more transparent for taxpayers. The government believes that reducing the tax burden will lead to increased household consumption, savings, and investment, ultimately boosting the economy.

    Benefits for the Middle Class

    Smt. Sitharaman emphasized that the new tax structure will significantly reduce the tax liabilities of the middle class. By leaving more money in their hands, the government hopes to stimulate economic activity. The Finance Minister stated, โ€œThe new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings, and investment.โ€

    In addition to the tax slab changes, the government is providing tax rebates to ensure that many taxpayers will not owe any taxes at all. This dual approach of lowering tax rates while offering rebates is designed to maximize benefits for the average citizen. The government aims to create a more favorable environment for the middle class, which is often seen as the backbone of the economy.

    A Vision for Good Governance

    The Finance Minister highlighted that taxation reforms are crucial for realizing the vision of a developed India, or “Viksit Bharat.” The new income tax bill is intended to carry forward the spirit of ‘Nyaya,’ or justice, by making the tax system simpler and more understandable for both taxpayers and tax administrators. This simplification is expected to lead to greater tax certainty and reduced litigation.

    Smt. Sitharaman quoted a verse from The Thirukkural, stating, โ€œJust as living beings live expecting rains, citizens live expecting good governance.โ€ She emphasized that these reforms are a means to achieve good governance, which involves being responsive to the needs of the citizens. The tax proposals reflect the government’s commitment to understanding and addressing the concerns voiced by the public.

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