The biggest beneficiary of India's Budget 2025 has been the salaried class in India. This year's budget has great benefits for the common middle class. Huge tax cuts were announced in this year's budget. Read more about the budget.

Is the new tax regime beneficial for young taxpayers?

Union Budget 2025 Highlights: As per the new tax proposals mooted by Nirmala Sitharaman, the new tax regime aims to ensure more disposable income for individuals to spend and invest the way they want.

The old tax regime forces individuals to invest in tax-saving investment options such as ELSS, provident funds, pension funds and life insurance. For this reason, a young taxpayer does not have to make the mandatory investments that people in the old tax regime used to save on taxes. In the new regime, the tax slabs for middle and lower income groups have been reduced.

What is Section 87A?

As per the Income Tax Act, 1961, if the annual income of an eligible taxpayer is less than Rs 5 lakh, then he can get full exemption from income tax.

As per the proposal in Budget 2025, Section 87A for resident individuals has been revised, increasing the rebate limit from ₹7 lakh to ₹12 lakh and the maximum rebate from ₹25,000 to ₹60,000. However, the rebate will not apply to income that is taxed at special rates if the individual remains in the default tax regime.

Simply put, suppose your income is up to 12 lakhs. For the first 4 lakhs you are not taxed, 4 lakhs to 8 lakhs that is up to the next 4 lakhs, you pay 5% tax that is 20,000 rupees. From 8 lakhs to 12 lakhs that is till next 4 lakhs you are paying 10% tax that is 40,000 rupees. The total tax payable here is Rs 60,000 while the standard deduction rebate is Rs 75,000. That is, income up to Rs 12 lakh after rebate will not be taxed.

A dream budget for the middle class?

Nirmala Sitharaman's Budget 2025 announcement is known as the "dream budget" for the middle class as the Union Finance Minister has proposed that there will be no tax up to ₹12 lakh per annum.

The main tax points that you should pay attention to:

1.Taxpayers with ordinary income up to ₹12 lakh (excluding special rate income such as capital gains) will not have any tax liability on account of rebate and lower slab rates.

2.Those earning ₹12 lakh will get a tax benefit of ₹80,000, which is 100% of the tax payable under the existing rates. For an income of ₹18 lakh, the benefit is ₹70,000, which is 30% of the tax payable.

3.Similarly, a person earning ₹25 lakh will get a benefit of ₹1,10,000, which is 25% of their tax liability as per current rates.