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Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Clear out junk files and repair common Windows errorsFree Scan →Scan for outdated or missing drivers - takes under a minuteDriver Scan →Budget 2025 proposed that a resident individual opting for India’s new tax regime would pay no regular income tax on total income up to ₹12 lakh, through an enhanced section 87A rebate. The proposal is not a universal exemption for every taxpayer or every kind of income. The Finance Bill specifies that the relevant rebate amendments take effect on 1 April 2026—FY 2026–27, corresponding to AY 2027–28—so the ₹12 lakh announcement should not be applied to an earlier tax year.
How the ₹12 lakh tax relief works
The Budget speech describes a higher rebate for a resident individual under the new regime. It says eligible individuals with total income up to ₹12 lakh would not pay tax, and notes that marginal relief would also apply when income is marginally above that threshold. The mechanism is a rebate under section 87A, not a change that makes all income or all tax liabilities universally exempt.
The Finance Bill’s section 87A amendment limits the deduction to no more than the income tax payable under the rates in section 115BAC(1A). That is why the announcement must be read with its stated regime, eligibility and effective date. The speech’s wording is: “It is proposed to increase the rebate for the resident individual under the new regime so that they do not pay tax if their total income is up to ₹ 12,00,000.” Union Budget 2025–26 speech, Ministry of Finance.
Who the ₹12 lakh threshold covers
The speech specifically refers to a resident individual under the new tax regime and to total income up to ₹12 lakh. It does not establish a blanket exemption for non-residents, all taxpayers, or people using a different regime. Nor does that sentence by itself resolve how every category of income taxed at a special rate interacts with the rebate. Taxpayers with such income should check the applicable statutory provisions and current tax-department guidance for their circumstances.
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What happens if total income is just over ₹12 lakh?
The speech says marginal relief, as provided earlier under the new regime, would also apply to income marginally above ₹12 lakh. This is relief for income just over the threshold; it is not a promise that income at any higher level will remain tax-free. The cited speech does not give a complete calculation method or define a single higher income point at which relief ends. The result therefore depends on the applicable rules and the taxpayer’s income and circumstances.
New-regime slabs announced in Budget 2025
The Budget speech proposed the following ordinary slab rates for the new regime. The rate applies progressively to income within each band; crossing a band does not make the higher rate apply to all income. These are the proposed rates stated in the speech, not a table of special rates that may apply to particular income categories.
Rank #2
| Total income band | Proposed rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001–₹8,00,000 | 5% |
| ₹8,00,001–₹12,00,000 | 10% |
| ₹12,00,001–₹16,00,000 | 15% |
| ₹16,00,001–₹20,00,000 | 20% |
| ₹20,00,001–₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Source: Ministry of Finance, Union Budget 2025–26 speech.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Which financial year does the proposal apply to?
The Finance Bill states that the section 87A amendments take effect from 1 April 2026. That date begins FY 2026–27; the corresponding assessment year is AY 2027–28. In contrast, the Finance Bill memorandum separately sets out rates for AY 2025–26. These are different tax periods and should not be conflated.
The date comes from the section 87A amendment text in the Finance Bill, 2025. The separate earlier-year rate schedule is in the Memorandum Explaining the Provisions in the Finance Bill, 2025. For filing or planning, use the enacted consolidated law and tax-department instructions applicable to the relevant year; the Budget speech and Bill explain the announcement and proposed effective date, rather than serving as a complete filing guide.
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