New Delhi, Feb 1: In a big boost to the Indian middle class, Union Finance Minister Nirmala Sitharaman on Saturday announced that there will be no income tax payable for incomes up to Rs 12 lakh, and Rs 12.75 lakh for salaried taxpayers (including standard deduction).

Sitharaman also stated that the new income tax regime will be simpler, with a special focus on benefiting the middle class.

But there is a catch, the exemption can be earned only if a tax payer takes relief under various sections of the income tax act like Rs 1.5 lakh exemption under section 80CCC, exemption of Rs 1.5 lakh for paying interest on home loans.

Sitharaman says "To tax payers up to Rs 12 lakh of normal income (other than special rate income such as capital gains) 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 by them"

The announcement from the Finance Minister of this big relief to the middle class was met by loud thumping of the desks by the treasury benches led by PM Narendra Modi.

The Finance Minister announced change in income tax slabs and rates across the board, ensuring a more progressive taxation system.

Sitharaman says "Slabs and rates are being changed across the board to benefit all tax-payers. The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment."

Under the new tax slabs income of up to Rs 4 lakh will have to pay Nil tax hiked from Rs 3 lakh. A tax payer in the new regime with an income of Rs 12 lakh will get a benefit of `Rs 80,000 in tax.

A person having income of `Rs 18 lakh will get a benefit of Rs 70,000 in tax. A person with an income of Rs 25 lakh gets a benefit of Rs 1,10,000 under the new tax slabs.

Here are the latest income tax slabs and rates for FY 2025-26.

Rs 0-4 lakh - Nil

Rs 4-8 lakh- 5%

Rs 8-12- 10%

Rs 12-16- 15%

Rs 16-20-20%

Rs 20-24- 25%

Above Rs 24 lakh- 30%

"The new tax structure would substantially reduce tax for the middle class," announced FM Sitharaman.

"The total tax benefit of slab rate changes and rebate at different income levels can be illustrated with a few examples, a taxpayer in the new regime with an income of 12 lakh rupees will get a benefit of 80,000 rupees in tax, which is 100% of tax payable as per the existing rates. A person having income, a person having income of 18 lakh rupees will get a benefit of 70,000 rupees in tax, that is 30% of tax payable as per existing base. A person with an income of 25 lakh gets a benefit of one lakh 10,000 rupees, that is 25% office tax payable as per existing rates," the Finance Minister said.

Presenting the Union Budget 2025-26, FM Sitharaman said that the tax deduction at source (TDS) rates will be rationalised and the limit for tax deduction for senior citizens will be doubled to Rs 1 lakh.

FM Sitharaman also proposed to extend the time limit to file the updated return from two years to four years.

The threshold to collect TDS on remittances under the Liberalised Remittance Scheme (LRS) would be increased to Rs 10 lakh from Rs 7 lakh and an annual limit of Rs 2.4 lakh for TDS on rent has been raised to Rs 6 lakh.

Delay for payment of TCS up to the due date would be decriminalised, according to the Finance Minister, adding that TCS on remittances, if a loan was taken for education, has been waived.

The Union Budget also proposes to exempt withdrawals from National Savings Scheme (NSS) accounts on or after August 2024 from tax.

The Budget Session of Parliament, which commenced on Friday, will be conducted in two phases - the first started on January 31 and will conclude on February 13, while the second phase will begin on March 10 and end on April 4.

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(With Input From IANS & ANI)