Finance Minister Nirmala Sitharaman has provided tax exemption on income up to ₹12 lakh for salaried middle-class individuals in the Budget 2025. Under the new tax regime, income up to ₹12.75 lakh will be tax-free. The TDS exemption limit has also been increased.

Highlights:

Income up to ₹12 lakh will be tax-free.

Under the new tax regime, income up to ₹12.75 lakh will be tax-free, including standard deduction.

TDS exemption limit increased from ₹2.4 lakh to ₹6 lakh.


Finance Minister Nirmala Sitharaman presented the Union Budget 2025, bringing great relief to salaried middle-class individuals. Now, those earning up to ₹12 lakh annually will not have to pay any income tax. Additionally, with the inclusion of the standard deduction, income up to ₹12.75 lakh will be tax-free.

As per the changes in the new tax regime, individuals earning up to ₹12 lakh will get a tax rebate of ₹80,000, making them exempt from tax. This means that those earning between ₹8 lakh and ₹10 lakh, who previously fell under the 10% tax bracket, will now enjoy full exemption.

If the salary exceeds ₹12 lakh, how much tax will be applicable?

Similarly, individuals earning an annual salary of ₹13 lakh can now save tax on income above ₹12 lakh, as they will get a standard deduction of ₹75,000 and additional relief of around ₹30,000.

It is important to note that previously, both the new and old tax regimes imposed a 30% tax on income exceeding ₹15 lakh. However, now there is a 25% tax slab for individuals with an income between ₹20 lakh and ₹24 lakh.

The objective of the 2025 budget’s tax slab changes is to reduce taxes for the middle class, leaving more money in their hands to boost domestic consumption, savings, and investment.

In this scenario, if your annual salary is less than ₹12 lakh, you won’t have to pay any tax. However, if your salary exceeds ₹12 lakh, let’s understand how much tax you would need to pay.

TDS Relief

The TDS exemption limit on annual rental income has been increased from ₹2.4 lakh to ₹6 lakh. This will provide relief to senior citizens and small taxpayers. In her budget speech, Finance Minister Nirmala Sitharaman stated, “This will reduce the number of transactions subject to TDS, benefiting small taxpayers by ensuring they receive a higher amount of their payments.”

There have been no changes in the old tax regime as per the latest announcement. However, taxpayers are still allowed to claim various exemptions and deductions while maintaining the existing higher tax rates.

The current tax slabs under the old tax regime for the financial year 2024-25 are as follows:

Under the old tax regime, various deductions can be claimed under different sections, such as:

Section 80C: Up to ₹1,50,000 for investments like PPF, ELSS, and LIC premiums.

Section 80D: For health insurance premiums.

Section 24(B): Up to ₹2,00,000 on home loan interest.

Other exemptions like HRA and LTA.


For senior citizens:

The tax-free limit for individuals aged 60-80 years is ₹3 lakh.

For those above 80 years, the tax-free limit is ₹5 lakh.