The Finance Act, 2025 has introduced changes to the tax structure for salaried individuals under the new tax regime. The government has adjusted income tax slabs and rates to provide financial relief to the middle class. The new tax rates range from 5% for income between Rs. 4,00,001 and Rs. 8,00,000, up to 30% for income above Rs. 24,00,000. For individuals with income up to Rs. 4,00,000, the tax rate remains zero. These adjustments are intended to lower the tax burden on a wide range of taxpayers, leaving them with more disposable income. This increased income is expected to stimulate household consumption, savings, and investment.
In addition to the new tax slabs, the government has increased the income threshold for the tax rebate under Section 87A from Rs. 7 lakhs to Rs. 12 lakhs for resident individuals opting for the new tax regime. The maximum rebate amount has also been raised from Rs. 25,000 to Rs. 60,000. This measure is designed to ensure that those with an income up to Rs. 12 lakhs pay no tax, creating a more equitable system. The provisions also include marginal relief for those with income slightly above the Rs. 12 lakh threshold.
Regarding the long-term effects of these tax changes, the government has not implemented any specific or separate measures to monitor their impact on domestic consumption and economic growth. The tax reforms are part of a broader fiscal strategy, but there are no dedicated systems in place to track the direct consequences of these specific changes on the economy.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
LOK SABHA
UNSTARRED QUESTION NO. 2412
TO BE ANSWERED ON MONDAY, AUGUST 4, 2025/SRAVANA 13, 1947 (SAKA)
REDUCTION OF TAX RATES FOR SALARIED INDIVIDUALS
2412. Shri Dushyant Singh
Will the Minister of FINANCE be pleased to state:
(a) the manner in which the reduction in tax rates and standard deduction for salaried individuals are likely to benefit the middle class in terms of overall financial relief; and
(b) the measures being taken by the Government to monitor the long-term impact of these tax changes on domestic consumption and economic growth?
ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) Finance Act, 2025 has provided substantial relief under the new tax regime with new slabs and tax rates as under: –
| Total income | Rate of tax |
| Upto Rs. 4,00,000 | Nil |
| From Rs. 4,00,001 to Rs. 8,00,000 | 5 per cent |
| From Rs. 8,00,001 to Rs. 12,00,000 | 10 per cent |
| From Rs. 12,00,001 to Rs. 16,00,000 | 15 per cent |
| From Rs. 16,00,001 to Rs. 20,00,000 | 20 per cent |
| From Rs. 20,00,001 to Rs. 24,00,000 | 25 per cent |
| Above Rs. 24,00,000 | 30 per cent |
Slabs and rates have been changed across the board to benefit all taxpayers. The new structure substantially reduces the taxes of the middle class and leaves more money in their hands, boosting household consumption, savings and investment.
Finance Act, 2025 has increased the income threshold for claiming a tax rebate under section 87A of the Income-tax Act, 1961 (‘the Act’) for resident individual taxable under the new tax regime under section 115BAC of the Act from Rs 7 lakhs to Rs 12 lakhs, and the maximum rebate amount has been raised from Rs 25,000 to Rs 60,000. Marginal relief as provided earlier under the new tax regime is also applicable for income marginally higher than Rs. 12,00,000.
These measures will play a significant role in creating a fair and equitable system of direct taxation that ensures no additional burden of direct taxes on the working and middle-class population of the country.
(b) There are no specific or separate measures taken to monitor the long-term impact of these reforms in taxation on domestic consumption and economic growth.
