Finance Minister Nirmala Sitharaman has unveiled significant tax relief measures in the Union Budget 2025, aimed at boosting disposable income and encouraging spending. One of the key announcements was that individuals earning ₹18 lakh annually will receive a tax benefit of ₹70,000, while those with an income of ₹25 lakh will save ₹1,10,000 under the revised tax structure. This move is expected to provide much-needed relief to salaried professionals and entrepreneurs in higher income brackets.
Tax Savings Breakdown
The Finance Minister noted that the revised slabs were designed to reduce the tax burden while ensuring progressive taxation. Under the new structure, taxpayers falling in the ₹16-20 lakh bracket will now be taxed at 20%, while those earning ₹20-24 lakh will pay 25%, and incomes above ₹24 lakh will be taxed at 30%. The recalibrated slabs have led to substantial savings, particularly for high earners who previously faced higher effective tax rates.
Economic Impact and Consumption Boost
With additional disposable income in the hands of taxpayers, the government expects a boost in domestic consumption, particularly in sectors such as real estate, automobiles, and consumer goods. Experts believe that increased spending power could help drive economic recovery and improve demand-driven growth in the post-pandemic environment.
Speaking on the changes, a senior economist from a leading financial institution stated: “The revised tax regime is a strategic move to put more money in the hands of the middle and upper-middle class, which could lead to increased discretionary spending. However, its long-term impact will depend on inflation trends and overall economic stability.”
Encouraging Compliance and Expanding the Tax Base
The government’s move is also seen as an attempt to enhance tax compliance by making the formal tax system more attractive. Lowering tax burdens for middle-income and upper-middle-income groups may encourage more individuals to file taxes transparently, reducing tax evasion. However, experts caution that compliance is influenced by multiple factors, including enforcement measures and ease of tax filing.
Final Thoughts
The Budget 2025 tax reforms mark a significant shift in India’s fiscal policy, prioritizing taxpayer relief and economic stimulus. While the changes are expected to increase consumption and improve financial security, their real impact will depend on macroeconomic conditions, inflation control, and execution efficiency. The new tax structure, combined with other fiscal measures, signals a move toward a more growth-oriented, taxpayer-friendly economic framework.
