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Finance Minister Nirmala Sitharaman announced sweeping changes to the income tax structure in the Union Budget 2025-26. The highlight of the budget is the introduction of zero income tax for individuals earning up to ₹12 lakh annually under the new tax regime. This bold step, along with adjustments to TDS and TCS thresholds, is set to provide significant relief to low- and middle-income taxpayers.

Key highlights of the budget announcement

The Finance Minister unveiled a revamped tax structure under the new tax regime, designed to benefit millions of taxpayers. Key changes include:

  • Zero income tax for earnings up to ₹12 lakh: Individuals with an annual income of ₹12 lakh (₹12.75 lakh for salaried taxpayers, including a standard deduction of ₹75,000) will no longer have to pay any income tax.
  • Revised tax slabs: The new tax rates are structured as follows:

    • ₹0-4 lakh: Nil
    • ₹4-8 lakh: 5%
    • ₹8-12 lakh: 10%
    • ₹12-16 lakh: 15%
    • ₹16-20 lakh: 20%
    • ₹20-24 lakh: 25%
    • Above ₹24 lakh: 30%

This restructuring aims to leave more money in the hands of taxpayers, encouraging higher consumption, savings, and investment.

Historic relief for the middle class

The announcement has been hailed as a "historic relief" for the middle class, with the Telugu Desam Party (TDP) calling it a transformative step. By increasing the tax-free income threshold, the government aims to address the financial pressures faced by middle-income families, particularly in urban areas.

Boost for consumption and economic growth

The tax reforms are expected to have a ripple effect on the economy. With more disposable income, households are likely to increase spending on goods and services, benefiting sectors like FMCG, automobiles, and retail. 

TDS and TCS thresholds revised

In addition to the income tax changes, the budget also introduced tweaks to Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) thresholds:

  • The TCS threshold has been raised from ₹7 lakh to ₹10 lakh.
  • The TDS threshold for senior citizens has been doubled, providing further relief to this demographic.

These changes aim to simplify the tax process and reduce the compliance burden on taxpayers.

Sector-specific reactions

The budget has garnered positive responses from various sectors:

  • Aviation: The expansion of a regional connectivity scheme aims to introduce numerous new destinations and bring millions of additional passengers into the aviation sector over the next decade.
  • Insurance: The decision to allow full foreign direct investment in the insurance sector is expected to drive innovation and increase market penetration.
  • Jewellery: The reduction in customs duty on jewellery from 25% to 20% has been welcomed by the gems and jewellery industry, with experts predicting a surge in domestic demand.

A step toward Viksit Bharat

The budget aligns with the government’s vision of a Viksit Bharat (Developed India) by 2047. By empowering the middle class, simplifying tax processes, and boosting key sectors, the budget aims to lay the foundation for sustainable economic growth.

Conclusion

The Union Budget 2025-26 marks a significant milestone in India’s fiscal policy, with its focus on reducing the tax burden on the middle class and stimulating economic activity. By increasing disposable income and simplifying tax structures, the government has taken a decisive step toward fostering financial inclusion and growth. As taxpayers across the country welcome these changes, the budget sets the stage for a brighter, more prosperous future. Now would be the perfect time to invest—buy shares online and take advantage of new opportunities!