India income tax-free?’, Anupam Mittal criticises 12 lakh tax exemption in Budget 2025

Shaadi.com founder and Shark Tank India star Anupam Mittal has criticised the new tax regime, claiming that only 1 crore people out of India’s 140 crore population will pay taxes in the financial year 2025-26, effectively making India “income tax-free.”

In a post on X, Mittal explained that 90% of tax filers in India have an income below Rs 13 lakh per annum, leading to his conclusion that only a small fraction of the population would contribute to the national income tax pool.

While Mittal’s claim of an “income tax-free” India is a provocative statement, it highlights a larger conversation around the fairness and structure of India’s taxation system under the new regime.

“Turns out that almost 90% tax-filers in India have an income below 13 lacs p.a. meaning out of 140 cr people only 1 cr will pay income tax this year effectively making India income-tax free,” reads Mittals’ post on X.

Anupam Mittal also called the new tax regime a “systemic correction” rather than just a tax cut. Taking to LinkedIn, he argued that a strong economy relies on an empowered middle class, not one burdened by excessive taxation. Drawing comparisons with the US and China, he noted that India’s salaried taxpayers were previously squeezed instead of encouraged to spend and invest. The Budget, he said, changes this by boosting disposable income, which can enhance lifestyles, savings, and investments. Summing up the impact, he wrote, “More income = More spending = More growth. Wealth fuels economies.”

Finance Minister Nirmala Sitharaman’s Tax Reforms

The Union Budget for 2025-26, presented by Finance Minister Nirmala Sitharaman, introduced significant changes to India’s tax slabs. The minister announced that individuals earning up to Rs 12 lakh would pay no tax, but this was widely misinterpreted. While there is a tax rebate, income up to Rs 12 lakh is not tax-exempt, but tax-free after deductions and rebates.

How Rs 12 Lakh Income Is Taxed

If an individual earns Rs 12 lakh per year, their income falls under three primary tax slabs:

Rs 0 – Rs 4 lakh → 0% tax

Rs 4 – Rs 8 lakh → 5% tax

Rs 8 – Rs 12 lakh → 10% tax

Thus, the tax liability for someone earning ₹12 lakh per year is calculated as follows:

Rs 4-Rs 8 lakh → Rs 20,000 (5% of Rs 4 lakh)

Rs 8-Rs 12 lakh → Rs 40,000 (10% of Rs 4 lakh)

Total Tax Liability: Rs 60,000

Tax Rebate and Standard Deduction: Reducing Tax to Zero

The 87A rebate has been increased from Rs 25,000 to Rs 60,000 for individuals earning up to Rs 12.75 lakh, which offsets the entire tax liability. Additionally, a standard deduction of Rs 75,000 is available, further reducing the tax burden. For someone with an income of Rs 12.75 lakh, after applying these deductions, their final tax liability remains zero.

Tax-Free Vs. Tax-Exempt: Understanding the Difference

It’s essential to distinguish between tax-free income and tax-exempt income:

Tax-exempt income refers to income that is not subject to tax.

Tax-free income means that tax is applied initially but then nullified through rebates and deductions.

In the case of Rs 12 lakh income, taxes are computed, but the rebate and standard deduction reduce the final liability to zero, making it tax-free-not tax-exempt.

Tax Exemption Limit for FY 2025-26

For the current financial year, the government has exempted a basic income of up to Rs 4 lakh from taxation. This means individuals earning up to Rs 4 lakh will not pay any tax and will not need to file an Income Tax Return (ITR). Income beyond Rs 4 lakh is subject to tax, but available deductions and rebates can reduce the final liability significantly.

The new tax regime brings both advantages and challenges. While the lower tax burden for those earning up to ₹12 lakh is welcomed, the complexities around tax-free income and the disparities in tax treatment for different sources of income continue to generate debate. As Mittal and Unagar pointed out, there are fairness issues to address, and the reforms should ensure that India’s tax system is both equitable and sustainable.

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