— Key Changes and What They Mean for You
The government has introduced a revamped tax structure, with Finance Minister Nirmala Sitharaman announcing that individuals earning up to Rs 12 lakh annually will now pay no income tax. This move, part of the latest Budget, aims to boost disposable income, encourage savings, and drive domestic consumption.
Who Benefits?
The Rs 12 lakh tax exemption applies only to those earning within this range. Those making more than Rs 12 lakh will follow a tiered taxation system. Additionally, a standard deduction of Rs 75,000 under the new regime increases the tax-free income to Rs 12.75 lakh.
Revised Tax Slabs:
Rs 0-4 lakh: No tax
Rs 4-8 lakh: 5% tax
Rs 8-12 lakh: 10% tax
Rs 12-16 lakh: 15% tax
Rs 16-20 lakh: 20% tax
Rs 20-24 lakh: 25% tax
Above Rs 24 lakh: 30% tax
How Tax is Calculated:
Tax is applied progressively based on income slabs. For example, an individual earning Rs 15 lakh (after the standard deduction) will be taxed as follows:
Rs 4 lakh: No tax
Rs 4-8 lakh: 5% = Rs 20,000
Rs 8-12 lakh: 10% = Rs 40,000
Rs 12-15 lakh: 15% = Rs 45,000
Total tax liability: Rs 1.05 lakh
Rebate:
A full rebate of Rs 60,000 ensures that individuals earning up to Rs 12 lakh have no tax liability. This is an improvement compared to the previous system, where tax dues were higher.
New vs. Old:
The old regime allowed exemptions but taxed income over Rs 10 lakh at 30%. For instance, tax liability for Rs 12 lakh income in the old regime was Rs 1.72 lakh, and for Rs 15 lakh, it was Rs 2.62 lakh. The new regime offers a significant reduction in tax, but individuals must evaluate whether the exemptions in the old system (like 80C, HRA) provide greater savings than the lower rates in the new regime.
Benefits:
If you earn up to Rs 12 lakh, the new tax regime is better, with zero tax.
If you earn more than Rs 12 lakh, compare the benefits of exemptions in the old system with the lower rates in the new system to see which works out best for you.
