The Union Budget 2025, was introduced on the 1st of Febraury by India’s Finance Minister Nirmala Sitharaman. The major announcement of the Budget that took the limelight was the exemption of the taxes for individuals with annual income upto Rs 12 lakhs. This brought a wave of happiness among the middle class of the country. Not only did the individuals with Rs 12 lakh per annum had a grim on their face, but people with more than Rs 12 lakh per annum income too felt the warmth of joy.
During her Budget 2025 speech, FM Sitharaman highlighted major tax relief for middle-class taxpayers by citing examples of salaried incomes of ₹18 lakh and ₹25 lakh per annum. She stated that under the new tax regime, individuals in these brackets would save ₹70,000 and ₹1.1 lakh, respectively, compared to the old regime. Against this backdrop, this article explain the differences between the two tax structures with detailed calculations for these two income groups.
Here is the new Tax Slab Table which the Finance Minister Tabled –
New Tax Slab Table (2025)
| Income Range | Tax Rate |
|---|---|
| 🟢 ₹0 to ₹4 Lakhs | Nil (0%) |
| 🟡 ₹4 Lakhs to ₹8 Lakhs | 5% |
| 🟠 ₹8 Lakhs to ₹12 Lakhs | 10% |
| 🔵 ₹12 Lakhs to ₹16 Lakhs | 15% |
| 🟣 ₹16 Lakhs to ₹20 Lakhs | 20% |
| 🔴 ₹20 Lakhs to ₹24 Lakhs | 25% |
| ⚫ Above ₹24 Lakhs | 30% |
How ₹18 Lakh Earners will save ₹70,000 Under the New Regime
Let’s now calculate the tax liability for an individual earning ₹18 lakh per annum under both the old tax regime and the new tax regime. By comparing the taxes payable under each system, we can determine which regime is more advantageous and exactly how much the individual stands to save.
1️⃣ Old Tax Regime Calculation
| Income Slab (₹) | Tax Rate | Tax Amount (₹) |
|---|---|---|
| 0 – 3,00,000 | Nil (0%) | 0 |
| 3,00,001 – 7,00,000 | 5% | (4,00,000 × 5%) = 20,000 |
| 7,00,001 – 10,00,000 | 10% | (3,00,000 × 10%) = 30,000 |
| 10,00,001 – 12,00,000 | 15% | (2,00,000 × 15%) = 30,000 |
| 12,00,001 – 15,00,000 | 20% | (3,00,000 × 20%) = 60,000 |
| 15,00,001 and above | 30% | (3,00,000 × 30%) = 90,000 |
Total Tax Under Old Regime:
= ₹20,000 + ₹30,000 + ₹30,000 + ₹60,000 + ₹90,000
= ₹2,30,000
2️⃣ New Tax Regime Calculation
| Income Slab (₹) | Tax Rate | Tax Amount (₹) |
|---|---|---|
| 0 – 4,00,000 | Nil (0%) | 0 |
| 4,00,001 – 8,00,000 | 5% | (4,00,000 × 5%) = 20,000 |
| 8,00,001 – 12,00,000 | 10% | (4,00,000 × 10%) = 40,000 |
| 12,00,001 – 16,00,000 | 15% | (4,00,000 × 15%) = 60,000 |
| 16,00,001 – 18,00,000 | 20% | (2,00,000 × 20%) = 40,000 |
Total Tax Under New Regime:
= ₹20,000 + ₹40,000 + ₹60,000 + ₹40,000
= ₹1,60,000
Summary
| Tax Regime | Total Tax Payable (₹) |
|---|---|
| Old Regime | ₹2,30,000 |
| New Regime | ₹1,60,000 |
Thus under the new tax regime an individual with 18 lakh per annum income will be able to save ₹70,000 by paying less taxes as compared to the old regime.
How ₹25 Lakh Earners will save ₹1.1 Lakh Under the New Regime
1️⃣ Old Tax Regime Calculation
| Income Slab (₹) | Tax Rate | Tax Amount (₹) |
|---|---|---|
| 0 – 3,00,000 | Nil (0%) | 0 |
| 3,00,001 – 7,00,000 | 5% | (4,00,000 × 5%) = 20,000 |
| 7,00,001 – 10,00,000 | 10% | (3,00,000 × 10%) = 30,000 |
| 10,00,001 – 12,00,000 | 15% | (2,00,000 × 15%) = 30,000 |
| 12,00,001 – 15,00,000 | 20% | (3,00,000 × 20%) = 60,000 |
| 15,00,001 and above | 30% | (10,00,000 × 30%) = 3,00,000 |
Total Tax Under Old Regime:
= ₹20,000 + ₹30,000 + ₹30,000 + ₹60,000 + ₹3,00,000
= ₹4,40,000
2️⃣ New Tax Regime Calculation
| Income Slab (₹) | Tax Rate | Tax Amount (₹) |
|---|---|---|
| 0 – 4,00,000 | Nil (0%) | 0 |
| 4,00,001 – 8,00,000 | 5% | (4,00,000 × 5%) = 20,000 |
| 8,00,001 – 12,00,000 | 10% | (4,00,000 × 10%) = 40,000 |
| 12,00,001 – 16,00,000 | 15% | (4,00,000 × 15%) = 60,000 |
| 16,00,001 – 20,00,000 | 20% | (4,00,000 × 20%) = 80,000 |
| 20,00,001 – 24,00,000 | 25% | (4,00,000 × 25%) = 1,00,000 |
| 24,00,001 and above | 30% | (1,00,000 × 30%) = 30,000 |
Total Tax Under New Regime:
= ₹20,000 + ₹40,000 + ₹60,000 + ₹80,000 + ₹1,00,000 + ₹30,000
= ₹3,30,000
Summary
| Tax Regime | Total Tax Payable (₹) |
|---|---|
| Old Regime | ₹4,40,000 |
| New Regime | ₹3,30,000 |
Thus under the new tax regime, an individual with income Rs 25 Lakhs per annum will be able to save ₹1,10,000 under the new tax regime. Budget 2025 unboxed the happiness of middle class which is easily visible across social media platforms.