90% taxpayers will move to New Tax Regime: CBDT chief on zero tax for salary up to Rs 12 lakh

Central Board of Direct Taxes (CBDT) Chairman Ravi Agrawal said that 90 per cent or more taxpayers are likely to move to the new tax regime from the current 75 per cent. Agarwal said that the Union Budget 2025 announcement of zero tax for earnings up to Rs 12 lakh could encourage people to make that shift.

“If not 100 per cent of the taxpayers, at least going forward next year onwards, we should see figures in the 90s (90 per cent) or maybe more than that,” he said adding that the motivation behind the rejig of the tax slabs was to provide substantial relief to the middle class. 

Agarwal said that such changes bring in positive sentiment in the economy and that propels growth. “So, basically once that growth happens, the people consume, and expenditure happens and then the economy grows, and when the economy grows, it again comes back in some form through taxes. So, basically, it is an integrated sort of exercise,” he explained in an interview to PTI.

The CBDT chief highlighted a strategic shift towards a ‘non-intrusive’ tax administration, noting that current systems, such as simplified ITR-1 forms and pre-filled returns, are not ‘very complex.’ The new tax regime (NTR) further facilitates ease in tax filing by removing deductions and exemptions, encouraging individuals to manage their taxes independently. 

The board is actively using technology to ‘widen and deepen’ the tax base. The use of ‘data analytics’ helps in informing taxpayers about potential discrepancies, prompting them to correct their filings, he said. This approach has led to 90,000 individuals revising their returns and contributing Rs 1,000 crore in taxes, while about 90 lakh people filed updated returns, adding Rs 8,500 crore to government revenues. 

FM NIRMALA SITHARAMAN’S NTR

FM Nirmala Sitharaman, in Budget 2025 said that there would be no income tax up to an income of Rs 12 lakh. “The middle class provide strengths to the economy. In recognition of their contribution, we have periodically reduced the tax burdens. I am now happy to announce that there will be no income tax up to an income of Rs 12 lakhs,” she said. 

The new tax slabs as mentioned by the finance minister are as follows: 

Zero to Rs 4,00,000 – No tax
Rs 4,00,000 to Rs 8,00,000 – 5%
Rs 8,00,0001 to Rs 12,00,000 – 10%
Rs 12,00,001 to Rs 16 lakh –15%
Rs 16,00,001 to Rs 20 lakh – 20%
Rs 20,00,001 to Rs 24 lakh – 25%
Above Rs 24 lakh – 30%

An additional Rs 75,000 standard deduction is also available for the salaried class.