'Budget is By The People, For The People, of The People': FM Sitharaman

The Union Budget 2025-26 has made the new tax regime more appealing, with income up to  Rs 12.75 lakh now tax-free due to increased rebates. While the old tax regime remains an option, the latest changes are expected to drive most taxpayers toward the new system.

Finance Minister Nirmala Sitharaman , while addressing the media, told, "There is no reduction in the public spending on capital expenditure. We continue to place emphasis on the multiplier effect that capital expenditure done by the government has shown has sustained us. We continue on that, and with all this, our fiscal prudence has been maintained..."
 

Shift to New Tax Regime 

Finance Secretary Tuhin Kanta Pandey stated that nearly 75% of taxpayers have already switched to the new tax regime. With the latest incentives, the government expects almost everyone to transition.
According to official data, 8.18 crore income tax returns were filed in the current financial year as of December 31, 2024.

The new tax regime, introduced in 2020-21, has gradually become more attractive with lower tax rates and enhanced rebates. In 2023, the tax-free income limit under the new regime was raised from  Rs 5 lakh to  Rs 7 lakh.
In 2025-26, this has been further increased to  Rs 12 lakh.
Additionally, salaried individuals will benefit from a  Rs 75,000 standard deduction, making income up to  Rs 12.75 lakh tax-free.

No Relief for Old Tax Regime Taxpayers

While the old tax regime remains available, the Finance Minister did not announce any additional relief for those choosing it. With the new structure offering significant benefits, the old system is expected to phase out gradually.

More Disposable Income for Taxpayers

Finance Minister Nirmala Sitharaman emphasized that these tax rebates would leave more money in people's pockets, benefiting nearly 1 crore taxpayers. The changes aim to boost disposable income and drive economic growth through increased consumer spending.

Capital Expenditure & Fiscal Prudence

Despite tax cuts, the government remains committed to public spending on capital projects. Sitharaman highlighted that capital expenditure has had a strong multiplier effect on economic growth and will continue to be a priority while maintaining fiscal prudence.

The new tax regime is now the clear choice for most taxpayers, offering higher exemptions and simplified tax filing. With income up to  Rs 12.75 lakh tax-free, the shift is expected to accelerate, marking a major transition in India's tax system.