While tax will still be levied at 5% for income between 4 lakh and 8 lakh and 10% for income between 8 lakh and 12 lakh, revised rebates and additional benefits per slab are expected to offset payable tax making it practically Nil.
Published Feb 01, 2025 | 3:37 PM ⚊ Updated Feb 01, 2025 | 3:37 PM
Nirmala Sitharaman during the budget. (X)
In what is being seen as a boost for the burgeoning middle class in India, Union Finance Minister Nirmala Sitharaman during her Union Budget speech on Saturday, 1 February, has provided relief with nil income tax to be paid for income up to ₹12 lakh.
This limit will be ₹12.75 lakh for salaried taxpayers, due to the standard deduction of ₹75,000.
“I am now happy to announce that there will be no income tax payable up to income of ₹12 lakh,” the minister said to thundering applause from the treasury bench.
“Democracy, demography and demand are the key support builders in our journey towards Vikasit Bharat,” the finance minister said adding the middle class provides strength for India’s growth.
She said that slabs and rates are being changed across the board to benefit all taxpayers. “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,” she added.
It doesn’t mean that tax will not be levied on income between 4 lakhs and 12 lakhs. As per the revised slabs too, 5 percent tax will be levied for income between 4 lakh and 8 lakh and 10 percent tax for income between 8 lakh and 12 lakh. However, revised rebates, additional benefits under each tax slab are expected to offset payable tax.
“To taxpayers, up to 12 lakh of normal income other than special rate incomes such as capital gains, a tax rebate is being provided in addition to the benefit due to slab rate reduction in such a manner that there is no tax payable by them,” she explained.
Sharing examples of how the new tax slabs work, the finance minister noted, “A taxpayer in the new regime with an income of ₹12 lakh will get a benefit of ₹80,000 in tax which is 100 percent of tax payable as per the existing rates. A person having an income of ₹18 lakh will get a benefit of ₹70,000 in tax which is 30 percent of tax payable as per existing rates. A person with an income of ₹25 lakh gets a benefit of ₹1.10 lakh which is 25 percent of the tax payable as per existing rates.”
It may be noted that the revised rebates and benefits are applicable only in the new income tax regime. The move is expected to convince more taxpayers to shift to the new regime from the old one.
Manu R, a Chartered Accountant based in Bengaluru speaking to South First believes this is a good change brought in by the Union Finance Minister for the salaried class.
“This will benefit the salaried income sector but might not benefit the corporates. Upto ₹12 lakh income in terms of salary, bank interest, you do not need to pay any penny,” he said.
He also added, “People will gain something and this is a shift for a lot of people to move out of the old regime and get into the new regime since it comes with the benefit of you just needing to declare your income and live free.”
(Edited by Sumavarsha)
