Budget Income Tax: In the Union Budget for the financial year 2025-26, Nirmala Sitharaman has increased the income tax exemption limit from the current 7 lakh rupees to 12 lakh rupees per year. This means that individuals with an annual income of 12 lakh rupees or less will no longer have to pay any tax.

Highlights: In the Union Budget, the income tax exemption limit has been increased from 7 lakh to 12 lakh. Now, there will be no tax on income up to 12 lakh. Salaried individuals will get an additional benefit of ₹75,000.

New Delhi: The Modi 3.0 government has continued the tax relief initiative for salaried individuals, which was started by the NDA government in 2014, by making a significant increase in the income tax exemption limit. This move is seen as completely different from the UPA’s practice of providing small tax reliefs to taxpayers. On Saturday, Finance and Corporate Affairs Minister Nirmala Sitharaman presented the Union Budget for 2025-26 and announced that no income tax will be levied on income up to ₹12 lakh. Under the new tax system, individuals with an average monthly income of ₹1 lakh will now be exempt from paying tax.

In addition, the salaried class will receive an additional benefit of 75 thousand rupees in the form of a higher tax exemption limit, meaning they will no longer have to pay tax up to 12.75 lakh rupees. Under the new tax system, the income tax exemption limit has been increased from 7 lakh rupees per year to 12 lakh rupees per year. Under the UPA government, in 2005, the income tax exemption limit was 1 lakh rupees, and it took the Manmohan Singh government seven years to double this limit to 2 lakh rupees in 2012.

Considering the long-standing demand of salaried, middle-class taxpayers, the Modi government increased the income tax exemption limit by 25% to ₹2.5 lakh in 2014. The beginning of Modi 2.0 in 2019 brought another mega bonus for middle-class taxpayers, where the income tax exemption limit was raised from ₹2.5 lakh to ₹5 lakh.

Under the efforts of the Modi government, a simplified new tax regime was introduced in the fiscal year 2020-21, offering taxpayers lower tax rates without any general deductions or exemptions. Subsequently, in 2023, Finance Minister Nirmala Sitharaman increased the exemption limit by ₹2 lakh, effectively raising the income tax exemption limit to ₹7 lakh under the new regime.

To understand this better, when Narendra Modi’s government came to power, Finance Minister Arun Jaitley, while presenting the budget, raised the personal income tax exemption limit from ₹2 lakh to ₹2.5 lakh. This meant that individuals earning up to ₹2.5 lakh annually would not have to pay any tax. Additionally, in the same budget, the exemption limit for senior citizens was increased from ₹2.5 lakh to ₹3 lakh. Furthermore, the limit for tax deductions under Section 80C was raised from ₹1 lakh to ₹1.5 lakh.

The 2020 budget presented by the Modi government was historic as it introduced a new income tax slab, giving taxpayers the option to either stay with the old slabs with deductions and exemptions or choose the new slabs with lower tax rates but without any exemptions. In 2023, the government made another significant change, increasing the tax rebate limit under the new income tax slab for taxpayers with income up to ₹7 lakh, providing relief to those with income up to ₹7 lakh. Additionally, a new tax slab was introduced, which included a standard deduction of ₹50,000.

For the fiscal year 2024-25, the Modi government made several important changes to the income tax system. The new tax regime was revised, where no tax was levied on annual income up to ₹7 lakh, whereas previously this limit was ₹5 lakh. Moreover, tax rates of 15% for income up to ₹10 lakh, 20% for income up to ₹12 lakh, and 30% for income up to ₹15 lakh were introduced. Finally, Finance Minister Nirmala Sitharaman, while presenting the budget for the fiscal year 2025-26, announced that under the new tax regime, the income tax exemption limit would be increased from ₹7 lakh per year to ₹12 lakh per year.