The Union Budget 2025-26 has announced a new tax structure that is expected to benefit around 5.65 crore taxpayers who fall under the income slab of Rs 4 lakh and above. According to a report by the State Bank of India (SBI), these taxpayers will collectively save approximately Rs 1 lakh crore in taxes. The report highlights that individuals earning between Rs 8 lakh and Rs 12 lakh per annum will gain the most from these changes.
The SBI report estimates that the tax savings will lead to a significant increase in consumption, with an additional disposable income of Rs 3.3 lakh crore. This increase in spending is expected to stimulate economic activity, contributing to a more dynamic and sustainable economy. Higher consumption levels will drive demand across various sectors, potentially leading to job creation and overall economic well-being.
The budget also introduced a change in the income tax return filing process, extending the time limit for filing updated income tax returns (ITR-U) from 24 months to 48 months. This change is aimed at giving taxpayers more time to voluntarily update their income details and pay any additional tax owed.
Finance Minister Nirmala Sitharaman stated in her budget speech that the government aims to simplify taxation, encourage voluntary compliance, and boost economic growth through increased consumption and investment. The government has increased the ‘Nil tax’ slab from Rs 2.5 lakh in 2014 to Rs 7 lakh in 2023, and has proposed a big income tax relief bonanza in the new tax regime.
The report notes that around 78 per cent of the returned filled under the Individual Income Tax (IT) are under the new tax regime. The government hopes that these measures will encourage taxpayers to opt for the new tax regime, which is expected to simplify taxation and boost economic growth.