Budget 2025: Based on media reports and social media discussions, it appears that FM Sitharaman has won the hearts of most salaried individuals by raising the tax-free annual income limit to Rs 12 lakh. Many in the middle class, who previously felt ignored and overtaxed by the government, are now happy that the government at last heard them.
Speaking about tax-free income under the new tax regime, the FM stated in her speech that individuals earning up to Rs 12 lakh will now pay no tax. However, when factoring in the standard deduction of Rs 75,000, the effective tax-free limit increases to Rs 12.75 lakh.
What are the deduction benefits available under new tax regime to save taxes?
To make the new tax regime more appealing, the government has been adjusting tax slabs and introducing benefits since its launch in Budget 2020. Two major changes were announced in last year’s Budget: an increase in the standard deduction limit from Rs 50,000 to Rs 75,000 and a higher tax deduction limit on the employer’s contribution to the National Pension System (NPS).
Also Read Your up to Rs 12 lakh annual income is not tax-exempt as wrongly perceived – it’s taxable! Tax structure decoded here New tax regime: How much money will you save if your income is Rs 25 lakh? Should you rethink NPS investments in 2025? The truth about tax benefits revealed! Direct tax collections rise 15.9% to Rs 16.9 lakh crore
Also read: Budget 2025: Rs 12 lakh annual income tax-free but you can’t include THESE incomes for benefit
When it comes to NPS, this is a significant provision. However, its implementation at the corporate level remains limited, as most companies do not yet offer this facility to their employees. Last year, the government increased the tax deduction limit on the employer’s contribution to NPS from 10% to 14% of the basic salary. This move brought private sector employees on par with their government counterparts, who were already entitled to a 14% deduction.
Surprisingly, despite this NPS provision, millions of taxpayers are not able to use this opportunity. The NPS benefit was introduced nearly a decade ago, yet only a small number of employees have taken advantage of it. Few corporates have implemented the NPS benefit,
» Read More
