Everything you need to know about the new income tax slabs

What is the major announcement regarding income tax in Budget 2025?

A: In a significant relief for middle-class taxpayers, Finance Minister Nirmala Sitharaman announced an increase in the tax rebate under Section 87A, ensuring that individuals with a net taxable income of up to Rs 12 lakh will pay zero tax under the new income tax regime.

Q: How many people will benefit from this revision?

A: An additional 1 crore people will pay no income tax due to the hike in the tax rebate to Rs 12 lakh per annum.

Q: What was the previous tax rebate limit?

A: Previously, individuals earning up to Rs 7 lakh were eligible for a full tax rebate. This threshold has now been increased to Rs 12 lakh.

Q: What are the new tax slabs for those earning more than Rs 12 lakh?

A: Under the revised tax structure, income up to Rs 4 lakh will be exempt from tax. Those earning between Rs 4 lakh and Rs 8 lakh will be taxed at 5 per cent, while income between Rs 8 lakh and Rs 12 lakh will attract a 10 per cent tax. A 15 per cent tax will be levied on income between Rs 12 lakh and Rs 16 lakh. The tax rate for income between Rs 16 lakh and Rs 20 lakh is set at 20 per cent, for Rs 20 lakh to Rs 24 lakh at 25 per cent, and for income above Rs 24 lakh at 30 per cent.

Q: How much tax will salaried individuals save?

A: The restructuring in tax slabs will allow individuals earning Rs 24 lakh or more to save Rs 1.10 lakh in income tax, while those with an annual income of Rs 12 lakh will benefit by Rs 80,000. The revised slabs are expected to provide relief to taxpayers across various income brackets.

According to government calculations, a person with an income of Rs 13 lakh will save Rs 25,000 in tax, while those earning Rs 14 lakh will save Rs 30,000. Individuals with an annual income of Rs 15 lakh will experience tax savings of Rs 35,000, while those earning Rs 16 lakh will save Rs 50,000. The savings continue to increase, with Rs 60,000 for those earning Rs 17 lakh, Rs 70,000 for Rs 18 lakh, and Rs 80,000 for Rs 19 lakh. Taxpayers earning Rs 20 lakh will save Rs 90,000, while those with incomes of Rs 21 lakh, Rs 22 lakh, and Rs 23 lakh will save Rs 95,000, Rs 1 lakh, and Rs 1.05 lakh, respectively.

Q: How does this impact salaried individuals with standard deductions?

A: For salaried individuals who avail of the standard deduction benefit of Rs 75,000 under the new tax regime, the tax-free threshold effectively increases to Rs 12.75 lakh.

Q: What happens if my income exceeds Rs 12 lakh?

A: If your annual income exceeds Rs 12 lakh, you will be taxed based on the revised slabs. The rebate under Section 87A is only applicable for those earning up to Rs 12 lakh.

Q: Does this rebate apply to capital gains and other special-rate incomes?

A: No, the rebate applies only to regular income such as salary or business profits. Capital gains and other special-rate incomes are taxed separately.

Q: What is the expected economic impact of this tax relief?

A: The government anticipates a revenue loss of approximately Rs 1 lakh crore in direct taxes and Rs 2,600 crore in indirect taxes due to these changes. However, the move is expected to boost disposable income, promote savings, and drive economic growth.

Q: What did Finance Minister Nirmala Sitharaman say about this decision?

A: She stated, “The government has put a substantial amount of money in the hands of people through the rejig of tax rates. One crore more people will pay no income tax, and this measure has been taken in response to the voice of the people.”

The decision is expected to boost consumer spending and contribute to overall economic growth by encouraging higher disposable income and increased financial security among the middle class.