In an attempt to increase consumption, Finance Minister Nirmala Sitharaman has boldly decided to raise the level of income exempted from Income Tax. With disposable money in the pockets of the middle class, consumption is most likely to increase, as well as investment and small savings. This will certainly boost the Indian economy.
No Income Tax Liability Up To Rs 12,75,000
The Finance Minister has announced that no tax will be payable to the annual income of Rs 12 lakh. If the standard deduction is added to this, it will come to Rs 12,75,000. In means, a taxpayer with an annual income of Rs 12,75,000 will not have to pay any tax.
Nirmala Sitharaman has also increased the basic income exemption limit from Rs 3 lakh to Rs 4 lakh. As the finance minister has raised the rebate from Rs 25,000 to Rs 60,000, individuals with annual income from up to Rs 12,00,000 will see their tax liability reduced to 0.
Tax Liabilities
Zero to Rs 4,00,000: No Tax
Rs 4,00,000 to Rs 8,00,000:5%
Rs 8,00,0001 to Rs 12,00,000:10%
Rs 12,00,001 to 16 lakh rupees:15%
Rs 16,00,001 to 20 lakh rupees:20%
Rs 20,00,001 to 24 lakh rupees: 25%
Above 24 lakh:-30%
More Money In Pockets Of Middle Class?
Analysts believe the bold move taken by Nirmala Sitharaman will enhance disposable income, encourage spending, and promote economic growth. Besides, she has taken the bold step of simplifying taxation and easing compliance, this will reinforce government commitment to a taxpayer-friendly system.
TDS Relief On HRA
While presenting the Union Budget 2025 on the floor of Lok Sabha amid thumping of tables by members from the treasury benches, the finance minister said that the annual limit of Rs 2.40 lakh for TDS on rent is being increased to Rs 6 lakh.
Nirmala Sitharaman explained, “This will reduce the number of transactions liable to TDS, thus benefiting small taxpayers receiving small payments”.
How Many People Pay Income Tax?
According to data shared by the government in 2024, only 8.09 crore people in India pay Income Tax. It was just 7.40 crore in FY 2023-24 and 6.72 crore in FY 22-23 while 6.48 crore in FY 2020-21.
In the FY 2023-24, only 4.40 crore people got the annual salary of Rs 2,50,000 to Rs 50,00,000. However, the Income Tax along with the transaction tax, collected during the FY 2023-24 was Rs 10.45 lakh crore. It was more than the corporate tax of Rs 9.11 lakh crore during the period.
The Ministry of Finance has estimated to collect Rs 11.87 lakh crore during the FY 2024-25.
Will It Push Consumption, Boost Economy?
Analysts believe considerable reduction in consumption is considered to be one of the main factors for the fall in the GDP growth rate from 8.2% in FY 2023-24 to an estimated 6.3% in FY 2024-25.
In the pre-budget presentation before the Finance Minister, the Confederation of Indian Industries (CII) suggested that the income tax rates should be slashed, tax slabs be reduced and other actions should be taken so that the salaried class is left with some additional disposable income.
It argued that the disposable income will push consumption and investment and it will fetch more revenue to the government, and the economy would move forward.
