The year 2025 has proven to be a game-changer for both the Indian economy and the common man. The central government has implemented three historic reforms in income tax, GST, and toll tax, providing significant relief from inflation. The biggest change is for the salaried class, where annual income up to ₹12.75 lakh is now completely tax-free, directly increasing the savings of the middle class.
GST 2.0 has brought most everyday items under the 5% or zero tax bracket. Taxes on cars and bikes have been reduced from 28% to 18%, making vehicle purchases more affordable than ever. Furthermore, to make road travel cheaper, the government has introduced an annual toll pass of ₹3,000, reducing toll costs to a nominal amount (on average ₹15).
As a result of these bold decisions, the country's growth rate reached a record high of 8.2% in the second quarter of the financial year 2025-26.
Income Tax Reform
In the 2025 General Budget, the Central Government announced an increase in the exemption limit under the new income tax regime from Rs. 7 lakh to Rs. 12 lakh. If this is combined with the Rs. 75,000 exemption available under the standard deduction, the amount increases to Rs. 12.75 lakh.
This means that any salaried person can claim income tax exemption on income up to Rs. 12.75 lakh. Only salaried persons can avail the standard deduction exemption.
GST Reform
The second biggest relief provided by the government this year has been GST 2.0. Under this, the government has reduced the number of GST slabs from four – 5 percent, 12 percent, 18 percent, and 28 percent – to two – 5 percent and 18 percent. The GST rate on luxury and sin goods has been fixed at 40 percent.
Following the implementation of the new GST rates, the GST rates on 453 items have been revised, with 413 items seeing a reduction. The GST rate on approximately 295 essential items has been reduced from 12 percent to 5 percent/zero.
The GST rate on petrol cars of 1,200 cc or less and diesel cars of 1,500 cc or less has been reduced from 28 percent to 18 percent. The GST rate on bikes of 350 cc or less has been reduced from 28 percent to 18 percent. Furthermore, a 40 percent GST has been imposed on luxury cars and bikes. Additionally, vehicle cess has been abolished.
Toll Tax Reform
To reduce the toll tax burden on the general public, the government has announced an annual pass in 2025, which will be implemented from August 15th. Under this scheme, the government is providing a FASTag annual pass to drivers. Its cost is ₹3,000. With this pass, any driver can cross 200 toll plazas. This reduces the cost of crossing a toll plaza to just ₹15. This has made traveling on highways much cheaper than before.
Disclaimer: This content has been sourced and edited from NDTV India. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
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