The Finance Ministry has clarified that the zero tax liability benefit applies only under the new tax regime, which has been the default system since 2023-24. However, to avail of this benefit, individuals must file their Income Tax Return (ITR).
Income Up to ₹12 Lakh is Now Tax-Free
On February 1, 2025, Finance Minister Nirmala Sitharaman announced a major relief for the middle class while presenting the 2025-26 budget. Previously, annual income up to ₹7 lakh was tax-free, but this has now been increased to ₹12 lakh. However, the Finance Ministry has specified that this benefit is only available under the new tax regime. To claim the tax exemption, individuals just need to file their ITR—no additional steps are required.
How Much Tax Was Payable on ₹12 Lakh Earlier?
Before this change, under the new tax regime, a person earning ₹12 lakh per year had to pay around ₹80,000 in taxes. With the new announcement, they can now claim full tax exemption by filing their ITR.
According to CA (Dr) Suresh Surana, even if someone earns less than ₹12 lakh, filing an ITR is still mandatory unless their income is below the basic exemption limit.
Who is Exempt from Filing ITR?
Taxpayers are not required to file ITR if their total income falls below the following basic exemption limits:
- ₹2.5 lakh for individuals below 60 years (under the old tax regime)
- ₹3 lakh for senior citizens (aged 60-79 years)
- ₹5 lakh for very senior citizens (aged 80+ years)
- ₹4 lakh for all individuals under the new tax regime
Other Situations Where Filing ITR is Mandatory
Even if total income does not exceed the exemption limit, individuals must file an ITR if they meet any of the following conditions:
- Bank account balance exceeds ₹1 crore
- Annual electricity bill is over ₹1 lakh
- Foreign travel expenses exceed ₹2 lakh
New Tax Slabs Under the Revised Tax Regime
The government has restructured the new tax regime to make annual income up to ₹10 lakh tax-free and introduced a new 25% tax slab for those earning between ₹15 lakh and ₹20 lakh. The updated tax slabs are:
- Up to ₹4,00,000 – 0% (No tax)
- ₹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 ₹24,00,001 – 30%
With these changes, taxpayers earning up to ₹12 lakh can enjoy zero tax liability, but filing an ITR remains mandatory to claim the benefit.
