New Delhi, Feb 3 : After revising the tax slabs in the Union Budget 2025-26 to give taxpayers more disposable income, the government is expected to present the much-awaited draft of the new Income Tax Bill on February 6.
The proposed bill aims to introduce major reforms to the existing Income Tax Act, potentially reducing its size by up to 3 lakh words from the current 6 lakh words. According to a report by NDTV Profit on Monday, the draft will likely include measures to widen the tax net, addressing the contraction in the tax base caused by the higher exemption limits.
Union Finance Minister Nirmala Sitharaman, during a post-Budget press conference, announced that approximately 1 crore taxpayers would benefit from the expanded rebates and exemptions under the new tax regime. She confirmed that individuals earning up to Rs 12 lakh annually would no longer be liable to pay any income tax.
The exemption limit has been significantly increased from Rs 7 lakh to Rs 12 lakh, representing a decisive shift in the tax structure. Comparing the current and new tax rates for FY25-26, Sitharaman explained that individuals earning Rs 8 lakh per year would save Rs 30,000, as their tax liability would be fully eliminated under the revised slabs.
Under the new regime, individuals earning up to Rs 12 lakh annually—equivalent to a monthly income of Rs 1 lakh (excluding special-rate income like capital gains)—will not have to pay income tax. Salaried taxpayers will enjoy a higher exemption limit of Rs 12.75 lakh due to a standard deduction of Rs 75,000.
Additionally, taxpayers earning Rs 12 lakh annually will benefit from a maximum rebate of Rs 60,000, further ensuring no tax liability. This rebate complements the relief provided by the lowered tax slabs, offering substantial financial benefits to middle-income earners.
