No Income Tax Up To Rs 12 Lakh: Is ITR (Income Tax Returns) Filing Mandatory?

In a major move to bolster the disposable income of citizens, the Indian government has restructured income tax slabs in the 2025-26 Union Budget.

Union Finance Minister Nirmala Sitharaman, on Saturday, announced that the tax rebate threshold will be elevated to ₹12 lakh per annum in the upcoming fiscal year, up from the current ₹7 lakh. This adjustment is expected to exempt an additional 1 crore individuals from paying income tax.

The revised tax structure under the new regime is as follows:

Income up to ₹4 lakh: No tax
₹4 lakh to ₹8 lakh: 5%
₹8 lakh to ₹12 lakh: 10%
₹12 lakh to ₹16 lakh: 15%
₹16 lakh to ₹20 lakh: 20%
₹20 lakh to ₹24 lakh: 25%
Above ₹24 lakh: 30%

Sitharaman emphasized that these changes aim to reduce the tax burden on the middle class, stating, "The government has put a substantial amount of money in the hands of people through the income tax rate rejig." She added that this move is in response to public demand.

Finance Secretary Tuhin Kanta Pandey noted that the tax buoyancy is projected at 1.42 for the next fiscal year, a decrease from the current 2. He explained that this conservative estimate accounts for the revenue foregone due to the increased rebate. Pandey also mentioned that 75% of income tax filers have already transitioned to the new tax regime, with expectations that more will follow.

Rs 12 Lakh Income Tax Exemption: Should You File an ITR?

Despite having no tax liability due to the raised rebate, individuals will still be required to file income tax returns (ITR). Tax experts highlight that filing an ITR is based on income levels, not tax liability. Maintaining a consistent filing record is beneficial for financial activities such as securing loans or visas.

These tax reforms are part of the government's broader strategy to stimulate economic growth by enhancing consumer spending power. By increasing the disposable income of the middle class, the administration aims to boost consumption, thereby driving demand across various sectors.