India has introduced significant changes to the personal tax regime in its Budget 2025, aimed at providing relief to the middle class. The revised tax structure is designed to reduce the financial burden on individuals, thereby encouraging greater disposable income, boosting household spending, and enhancing savings.
According to expert commentary on India Budget 2025, PwC has stated that the income tax rates, including surcharge and the health and education cess, will remain unchanged for those opting for the old tax regime. However, individuals under the new personal tax regime will benefit from an updated set of tax slabs, which take effect from the assessment year 2026-27.
Revised Tax Slabs for the New Personal Tax Regime:
| Total Income (INR) (Existing) | Tax Rates (Existing) | Total Income (INR) (Proposed) | Tax Rates (Proposed) |
| 0 – 300,000 | Nil | 0 – 400,000 | Nil |
| 300,001 to 700,000 | 5% | 400,001 to 800,000 | 5% |
| 700,001 to 10,00,000 | 10% | 800,001 to 12,00,000 | 10% |
| 10,00,001 to 12,00,000 | 15% | 12,00,001 to 16,00,000 | 15% |
| 12,00,001 to 15,00,000 | 20% | 16,00,001 to 20,00,000 | 20% |
| Above 15,00,000 | 30% | 20,00,001 to 24,00,000 | 25% |
| – | – | Above 24,00,000 | 30% |
India Budget 2025 also proposes an enhancement in the tax rebate limit from INR 25,000 to INR 60,000. This adjustment effectively results in a nil tax liability for individuals with a total income of up to INR 12,00,000 under the new personal tax regime. PwC noted that salaried taxpayers earning up to INR 12,75,000 would benefit from zero tax liability due to these changes.
Despite modifications to the personal income tax structure, India’s corporate income tax rates remain unchanged. Experts believe that the updated tax slabs will help strengthen India’s economic growth by improving the financial well-being of the middle class, thereby fostering increased domestic consumption and investment.
Additionally, the government’s focus on tax relief for middle-income groups is expected to enhance disposable income, which in turn can lead to higher retail spending and savings. As people retain more earnings, businesses across various sectors could see increased demand, contributing to overall economic stability and expansion. The revised tax policy reinforces India’s commitment to economic progress by balancing tax relief with sustained revenue collection.