Union Budget 2025: New Income Tax Slab Rate

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The Union Budget 2025 has introduced a series of income tax reforms aimed at simplifying the tax system and providing relief to middle-income earners. Finance Minister Nirmala Sitharaman announced a new, default tax regime that offers tax relief to individuals, particularly those in the lower to middle-income brackets. These changes are expected to make compliance easier and more accessible for taxpayers.


In respect of income of all categories of assessees liable to tax for the assessment year 2025-26, the rates of income-tax have either been specified in specific sections of the Act (like section 115BAA or section 115BAB for domestic companies, section 115BAC for individual/HUF/AOP (other than a co-operative society)/BOI/AJP and section 115BAD or section 115BAE for cooperative societies) or have been specified in Part I of the First Schedule to the Bill.

There is no change proposed in tax rates either in these specific sections or in the First Schedule. The rates provided in sections 115BAA or 115BAB or 115BAC or 115BAD or 115BAE of the Act for the assessment year 2025-26 would be same as already enacted.

Similarly rates laid down in Part III of the First Schedule to the Finance (No. 2) Act, 2024, for the purposes of computation of “advance tax”, deduction of tax at source from “Salaries” and charging of tax payable in certain cases for the assessment year 2025-26 would now become Part I of the First Schedule. Part III would now apply for the assessment year 2026-27.


For assessment year 2025-26, as per the provisions of sub-section (1A) of section 115BAC of the Act, an individual or Hindu undivided family or association of persons [other than a co-operative society], or body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2, has to pay tax in respect of the total income at following rates:

No Tax on Income Up to ₹3,00,000

Under the new tax regime, individuals with an annual income of up to ₹3,00,000 will be exempt from paying any income tax. This move is expected to provide significant relief to low-income earners, ensuring that they are not burdened by taxes. The threshold for tax exemption has been set higher compared to previous years, making it more inclusive for individuals across the country.

Progressive Tax Slabs for Higher Incomes

For taxpayers earning between ₹3,00,001 and ₹7,00,000, the income tax will be levied at a reduced rate of 5%. This is a modest rate compared to the traditional income tax slabs, ensuring that individuals in this income group can keep a larger portion of their earnings.

In the next tax slab, for those earning between ₹7,00,001 and ₹10,00,000, a 10% tax will be applicable. This middle-income group will continue to benefit from the progressive tax structure that keeps their financial burdens manageable.

Relief for the Upper Middle Class

The higher-income group, earning between ₹10,00,001 and ₹12,00,000 annually, will see a 15% tax rate applied. While this may seem steep compared to the lower tax brackets, it remains considerably competitive in the global tax landscape and ensures that higher earners contribute a fair share to the country’s revenue.

A Step Towards Simplification and Transparency

The introduction of a new default tax regime aims to streamline the income tax process, offering a simplified structure that is easier for individuals to navigate. By reducing the number of tax slabs and lowering the tax burden on those with lower to middle incomes, the government is making strides towards a more inclusive and transparent taxation system.

Finance Minister Sitharaman’s proposals also emphasize the government’s broader vision of boosting domestic consumption, promoting savings, and ensuring economic stability. With the tax reforms in place, the government expects increased disposable income in the hands of the citizens, further driving economic growth and development.

In conclusion, the new tax regime presented in Union Budget 2025 provides tangible relief to millions of taxpayers, particularly in the lower and middle-income groups. It aligns with the government’s goals of boosting economic growth, simplifying taxation, and promoting greater financial security for the population.

Read More: LIVE UPDATES : Union Budget 2025-26 

Mariya Paliwala
Mariya Paliwalahttps://jurishour.in/
Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.

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