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New Delhi: The government of India’s decision to remove personal income tax for individuals earning up to Rs 12 lakh annually will boost consumption.
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 the middle class by raising exemption limits and rejigging slabs.
"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.
"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.
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.
Mayank Shah, Vice President, Parle Products, said that the Union Budget takes a bold step toward spurring demand for consumer goods, addressing challenges the sector has faced over the past few years. “For instance, making an effective tax free income of Rs.12.75 lakh is quite effective as it increases consumption due to higher disposable earnings. The capturing of rural demand via targeted agricultural investment across 100 regions, along with MSME aid assistance, will serve the dual purpose of creating additional employment and uplifted spending power.”
He continued, “Some new job opportunities and utilisation of physical resources and economic activity is expected with the increased concentration on rural and urban infrastructural development, which includes the Urban Challenge Fund.”
The consumer demand has largely been depressed in the recent past due to inflation and increasing costs of inputs, but with these changes, the hope is that there is an increase of purchasing power within the common man. Consequently, this will also create a demand for capital goods supporting industries further down the line.
Shah summarised that the budget lays the foundation of economic growth across all sectors rather than just certain groups and so the long term positive impacts will be felt across the board. It is a goal oriented look towards broad based economic development, expansion of demand, recovery development and sustainability.
Sanket S, Co - founder of Scandalous foods said that the simplification of tax structures and the increased income tax slab to Rs 12 lakh reflect a modern approach to redefining the middle class, boosting disposable income and economic participation.
According to Aasif Malbari, Chief Financial Officer - Godrej Consumer Products, the Union Budget 2025 takes a balanced approach by strengthening rural infrastructure, manufacturing, and consumer spending—three critical pillars for the FMCG sector.
He added, “Investments in rural development and job creation will boost economic activity and drive higher consumption, opening new opportunities for market expansion. The National Manufacturing Mission is a strong step toward enhancing domestic production, reducing import dependencies, and improving cost efficiencies. Additionally, tax reforms benefiting the middle class will increase disposable income, further fueling demand across essential and aspirational FMCG categories. Overall, the Budget lays a strong foundation for a more consumption-driven economy, creating significant growth opportunities for the FMCG industry."
Aman Choudhary, Executive Director—Marketing at Anmol Industries, applauded the 2025 Union Budget for its progressive measures to boost the FMCG sector and strengthen rural demand. He said, "The government’s continued focus on infrastructure, job creation, and MSME support will drive consumption and economic growth. Additionally, logistics and supply chain efficiency investments will enhance distribution networks, benefiting both manufacturers and consumers. This budget sets the stage for sustained growth, empowering businesses like ours to innovate and expand in a dynamic market."
Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance, commented, “The focus on strengthening the middle class through enhanced tax exemptions will put more money in people’s hands, boosting consumption, savings, and overall economic momentum.”