**Policy Summary: Reduction of Tax Rates for Salaried Individuals (Finance Act, 2025)**
This document summarizes the Indian government's response to Lok Sabha Unstarred Question No. 2412, concerning the reduction of tax rates and standard deductions for salaried individuals, as addressed on August 4, 2025.
The Finance Act, 2025, introduces a revised tax regime intended to benefit the middle class through adjusted income tax slabs and rates. The new tax rates are structured as follows:
* Up to Rs. 4,00,000: Nil
* Rs. 4,00,001 to Rs. 8,00,000: 5%
* Rs. 8,00,001 to Rs. 12,00,000: 10%
* Rs. 12,00,001 to Rs. 16,00,000: 15%
* Rs. 16,00,001 to Rs. 20,00,000: 20%
* Rs. 20,00,001 to Rs. 24,00,000: 25%
* Above Rs. 24,00,000: 30%
Furthermore, the income threshold for claiming a tax rebate under section 87A of the Income-tax Act, 1961, for resident individuals taxable under the new tax regime under section 115BAC of the Act has been increased from Rs. 7 lakhs to Rs. 12 lakhs. The maximum rebate amount has also been raised from Rs. 25,000 to Rs. 60,000. Marginal relief continues to be applicable for income marginally higher than Rs. 12,00,000.
The stated intention of these measures is to increase disposable income for the middle class, thereby stimulating household consumption, savings, and investment.
The response indicates that there are no specific measures in place to monitor the long-term impact of these tax reforms on domestic consumption and economic growth.
**Contact:** Shri Pankaj Chaudhary, Minister of State in the Ministry of Finance.
Key Entities Referenced
Ministry of Finance: A department of the Government of India responsible for financial matters.
Department of Revenue: A department under the Ministry of Finance responsible for tax collection and administration.
Shri Dushyant Singh: Member of Parliament who posed the question regarding tax rate reduction.
Shri Pankaj Chaudhary: The Minister of State in the Ministry of Finance who provided the answer to the question.
Finance Act, 2025: A law that provided tax relief under the new tax regime.
Incometax Act, 1961: The principal law governing income tax in India.
Section 87A: A section of the Incometax Act, 1961 related to tax rebates for resident individuals.
Section 115BAC: A section of the Incometax Act, 1961 related to the new tax regime.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
LOK SABHA
UNSTARRED QUESTION NO. 2412
TO BE ANSWERED ON MONDAY, AUGUST 4, 2025/SRAVANA 13, 1947 (SAKA)
REDUCTION OF TAX RATES FOR SALARIED INDIVIDUALS
2412. Shri Dushyant Singh
Will the Minister of FINANCE be pleased to state:
(a) the manner in which the reduction in tax rates and standard deduction for salaried individuals are likely
to benefit the middle class in terms of overall financial relief; and
(b) the measures being taken by the Government to monitor the long-term impact of these tax changes on
domestic consumption and economic growth?
ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) Finance Act, 2025 has provided substantial relief under the new tax regime with new slabs and tax rates
as under: -
Total income Rate of tax
Upto Rs. 4,00,000 Nil
From Rs. 4,00,001 to Rs. 8,00,000 5 per cent
From Rs. 8,00,001 to Rs. 12,00,000 10 per cent
From Rs. 12,00,001 to Rs. 16,00,000 15 per cent
From Rs. 16,00,001 to Rs. 20,00,000 20 per cent
From Rs. 20,00,001 to Rs. 24,00,000 25 per cent
Above Rs. 24,00,000 30 per cent
Slabs and rates have been changed across the board to benefit all taxpayers. The new structure substantially
reduces the taxes of the middle class and leaves more money in their hands, boosting household
consumption, savings and investment.
Finance Act, 2025 has increased the income threshold for claiming a tax rebate under section 87A of the
Income-tax Act, 1961 (‘the Act’) for resident individual taxable under the new tax regime under section
115BAC of the Act from Rs 7 lakhs to Rs 12 lakhs, and the maximum rebate amount has been raised from
Rs 25,000 to Rs 60,000. Marginal relief as provided earlier under the new tax regime is also applicable for
income marginally higher than Rs. 12,00,000.
These measures will play a significant role in creating a fair and equitable system of direct taxation that
ensures no additional burden of direct taxes on the working and middle-class population of the country.
(b) There are no specific or separate measures taken to monitor the long-term impact of these reforms in
taxation on domestic consumption and economic growth.
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