Why is income up to ₹12 lakh tax-free? Finance Minister explains

New Delhi (The Uttam Hindu): After presenting the Union Budget 2025-26, Finance Minister Nirmala Sitharaman addressed a key question regarding the government’s decision to keep annual incomes up to ₹12 lakh tax-free. In an interview, she explained the rationale behind this move. She stated that discussions among the middle class often revolve around what benefits they receive. The government, she emphasized, focuses on all sections of society while making decisions. This time, a detailed analysis was conducted on the lifestyle and financial conditions of individuals earning at least ₹1 lakh per month. Based on these observations, the government decided to exempt this income bracket from taxation.

In the same interview, the Finance Minister also addressed concerns about rationalizing customs duties. She clarified that the government’s objective is to accelerate India’s economic growth and strengthen self-reliance. Responding to a question about whether the reduction in import duties on certain automobiles—benefiting companies like Tesla and Harley-Davidson—was an indirect signal amid U.S. tariff policies under former President Donald Trump, she dismissed such speculation. Sitharaman emphasized that the government is prioritizing the Indian economy by reinforcing its foundation and transforming the country into a global manufacturing hub. The reduction in customs duties, she explained is aimed at making raw materials more affordable for MSMEs, securing essential minerals and enabling Indian companies to import materials while exporting high-value finished products.

Ahead of Prime Minister Narendra Modi’s upcoming visit to the U.S., the tariff on Harley-Davidson bikes has been further reduced. The duty on completely built units (CBUs) of motorcycles with engine capacities above 1600cc has been slashed from 50% to 40%. Additionally, import duties on cars and other motor vehicles have also been lowered, though it remains unclear if their effective tax rates will change. Sitharaman reiterated that the budget maintains a balance between strengthening the foundation of a "Developed India" and ensuring equal attention to key sectors like healthcare, nutrition and education through welfare schemes. She also dismissed opposition claims that the BJP-led central government was using budget announcements to appeal to voters in Bihar and Delhi. This was Sitharaman’s eighth consecutive budget presentation.