Union Budget 2025: Sitharaman announces no tax up to ₹12 lakhs yet fine print leaves many confused ; ‘no clarity’

In a major announcement during the Union Budget 2025, Finance Miner Nirmala Sitharaman declared that individuals earning up to ₹12 lakh annually would not have to pay income tax. She called it a step towards supporting the middle class. With the inclusion of the standard deduction of ₹75,000, this means that incomes up to ₹12.75 lakh will effectively have no tax liability. “I am now happy to announce that there will be no income tax payable up to income of ₹12 lakh [i.e. average income of ₹1 lakh per month other than special rate income such as capital gains] under the new regime,” the Finance Miner said. Nirmala Sitharaman The decision comes as an effort to boost spending and increase consumption in the economy. Sitharaman explained, “The new tax structure will substantially reduce the taxes of the middle class, leaving more money in their hands and boosting consumption.” She also mentioned that taxpayers earning up to ₹12 lakh, excluding capital gains and other special-rate income, will receive a tax rebate that ensures they owe no tax. “I propose to revise tax rate structures as follows: 0 to ₹4 Lakhs – nil, ₹4 Lakhs to ₹8 Lakhs – 5%, ₹8 Lakhs to ₹12 Lakhs – 10%, ₹12 Lakhs to ₹16 Lakhs – 15%, ₹16 Lakhs to ₹20 Lakhs – 20%, ₹20 Lakhs to ₹24 Lakhs – 25% and above ₹24 Lakhs – 30%. To taxpayers up to ₹12 Lakhs of normal income other than special rate income such as capital gains, a tax rebate is being provided in addition to the benefit due to slab rate reduction in such a manner that there is no tax payable them,” she added. Income tax slab structure This was Sitharaman’s eighth consecutive Budget presentation, putting her closer to the record held former Prime Miner Morarji Desai, who presented ten Budgets during his lifetime. Public reaction: Happy but confusedFollowing the announcement, social media users expressed both excitement and confusion. Some praised the move, with one user on X saying, “Nirmala Ji, I wasn’t aware of your game. Shukriya!” Another wrote, “A very big bonanza for middle-income groups. Congratulations to Nirmala Ji!” However, most others found the new tax structure difficult to understand. The main source of confusion was with respect to tax slabs for different income ranges; while the Finance Miner said there is no tax up to ₹12 lakh, the tax chart still claims that incomes between ₹4 to 8 lakh will pay 5% tax while those with an approximate income of ₹8 to 12 lakh will pay 10%. “Very confusing, especially the chart given. Why can’t we get clear communication from the minry? The headline of ‘no tax till ₹12 lakh’ is different from ‘no tax till ₹4 lakh,’” one user pointed out. Another asked, “If there’s no tax up to ₹12 lakh, why do we still have slabs for ₹4-8 lakh and ₹8-12 lakh? What’s simple about this new regime?” Basically, Sitharaman has revised tax slabs to reduce the tax burden for those earning between ₹4 lakh and ₹12 lakh. They will now be taxed at lower rates (5% to 10%, depending on income), and with the rebate, their total tax comes down to zero. But only time will tell how effectively this policy will work and whether taxpayers will be able to navigate the rebate system easily.