Modi’s middle-class bonanza ahead of Delhi polls; no income tax up to Rs 12 lakh

New Delhi: Ahead of the Delhi assembly elections, the Modi government announced the biggest-ever bonanza for the middle class by hiking the Income Tax exemption limit to Rs 12 lakh per annum under the New Tax Regime.

Delhi has 40 lakh income tax payers. With the Modi government's announcement in the Budget 2025-26, the BJP will try to win over the middle-class vote, which has been a crucial demographic in Delhi elections.

Individuals earning up to Rs 12 lakh annually will not have to pay any income tax under the new tax regime as Finance Minister Nirmala Sitharaman on Saturday gave relief to middle class by raising exemption limit and rejigging slabs.

For salaried employees, this nil tax limit will be Rs 12.75 lakh per annum, after taking into account a standard deduction of Rs 75,000.

Higher exemptions and rejigs have been effected under the new income tax regime.

"I am now happy to announce that there will be no income tax payable up to income of Rs 12 lakh (i.e. average income of Rs 1 lakh per month other than special rate income such as capital gains) under the new regime," the finance minister said.

"The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment," Sitharaman said in her Budget speech.

As per the rejig, for people earning more than Rs 12 lakh per annum, there will be nil tax for income up to Rs 4 lakh, 5 per cent for income between Rs 4 and 8 lakh, 10 per cent for Rs 8-12 lakh, 15 per cent for Rs 12-16 lakh.

A 20 per cent income tax will be levied on income between Rs 16 and 20 lakh, 25 per cent on Rs 20-24 lakh and 30 per cent above Rs 24 lakh per annum.

A tax payer in the new regime with an income of Rs 12 lakh will get a benefit of Rs 80,000 in tax. A person having income of Rs 18 lakh will get a benefit of Rs 70,000 in tax.

A person with an income of Rs 25 lakh gets a benefit of Rs 1.10 lakh.

The 12 lakh limit is only applicable when your gross income is less than 12 lakh including any capital gains.

Anyone crossing gross income of 12L will have below tax slabs:

0L-4L 0%
4L-8L 5%
8L-12L 10%
12L-16L 15%
16L-20L 20%
20L-24L 25%
24L 30%

No Income Tax if Income less than 12L gross income.

Experts were expecting relief up to the Rs 10 lakh annual income category.

On Friday, Prime Minister Modi began his customary pre-session remarks to the media by invoking Lakshmi, the goddess associated with wealth and prosperity, and said he prayed for special blessings for the poor and middle class.

The announcement is expected to resonate with Delhi voters who will choose the next government on Wednesday.

Voters from the middle class hold the key to power in Delhi, and all political parties are trying to impress them with their promises.

Delhi goes to polls on February 5 with results to be declared on February 8. The BJP, which has been out of power since 1998, is making concerted efforts to dethrone the Arvind Kejriwal-led Aam Aadmi Party which has been ruling Delhi since 2015.

While the Modi government provided historic relief to the middle class, the Aam Aadmi Party (AAP) on January 22 released a manifesto targeting the middle class, raising seven demands to the Centre related to education, health, tax rebates, and pensions.

In the past, Kejriwal said that Delhiites have been paying over Rs 1.78 lakh crore in income tax, but they don't get back much in shares of central taxes.

Last month, the Election Commission had directed the Central government to refrain from announcing any Delhi-specific schemes or initiatives in the Union Budget, citing enforcement of the Model Code of Conduct ahead of the Delhi Assembly polls.

Meanwhile, Prime Minister Narendra Modi lauded the Union Budget, presented by Finance Minister Nirmala Sitharaman, as a "people's budget" that puts more money in the hands of people and said it is a force-multiplier that will increase investments and lead to growth.