If you’re a salaried employee in India, your April paycheck might be a little heavier than usual. The Union Budget 2025-26 has introduced significant changes to the income tax framework, making annual earnings up to ₹12 lakh completely tax-free under the new tax regime.
New Tax Slabs & Full Rebate Up to ₹12 Lakh
As part of its reform-focused approach, the government has revised income tax slabs for FY 2025-26 and granted a full rebate under Section 87A to individuals earning up to ₹12 lakh per annum. This isn’t a tax exemption—your income is still assessed under standard slab rates—but the rebate cancels your tax liability entirely if your taxable income stays within the ₹12 lakh limit.
This move is expected to significantly reduce the TDS (Tax Deducted at Source) on your monthly salary beginning April 2025, directly increasing your take-home pay. According to the Income Tax Department, here’s how much more you could be receiving every month:
| Annual Income | Monthly Increase | Annual Tax Benefit |
|---|---|---|
| ₹12 lakh | ₹6,650 | ₹80,000 |
| ₹16 lakh | ₹4,150 | Approx. ₹50,000 |
| ₹18 lakh | ₹5,830 | ₹70,000 |
| ₹25 lakh | ₹9,170 | ₹1,10,000 |
These figures reflect savings under the new tax regime, which encourages more employees to transition away from the older structure. Notably, the Finance Minister confirmed that the government expects to absorb a revenue loss of ₹1 lakh crore due to this sweeping reform.
Marginal Relief for Incomes Slightly Above ₹12 Lakh
For individuals earning just over the ₹12 lakh threshold, a marginal relief has been introduced to prevent disproportionate tax liabilities. This ensures that any additional income doesn’t result in excessive tax burden—an often-overlooked aspect of income tax planning.
Here are a few indicative scenarios:
- ₹12.85 lakh income: Tax payable: ₹10,000
- ₹13.25 lakh income: Tax payable: ₹50,000
- ₹13.45 lakh income: Tax payable: ₹70,000
These marginal benefits make sure the new rebate threshold doesn’t penalize those marginally over the ₹12 lakh mark. The intent is clear: support middle-income earners while simplifying the tax structure.
Meanwhile, financial experts recommend reviewing your salary structure and deductions under the new regime for maximum benefit. If you’re unsure whether to opt in, consult your company’s payroll team or a certified tax advisor.
With increased take-home salaries and reduced compliance burdens, these updates are expected to influence consumption patterns and market trends, especially in sectors like banking and auto. A bank rally could be on the horizon as disposable incomes rise, while auto stocks may benefit from an uptick in personal spending.
For more detailed updates, visit the official Union Budget 2025-26 portal.