Delhi February 2 (Punjab Khabarnama Bureau): In a major move to reduce the tax burden on the middle class, finance minister in her Union Budget 2025 speech, announced that no income tax will be payable for incomes up to ₹12 lakh under the new tax regime.
However, this has caused some confusion, especially since the income tax slabs still show taxes for income brackets from ₹0 to ₹12 lakh.
Let’s decode how the income tax relief for those earning up to ₹12 lakh works:
Revised tax slabs
0 – 4 lakh: No tax
₹4 – ₹8 lakh: 5% tax
₹8 – ₹12 lakh: 10% tax
₹12 – 16 lakh: 15% tax
16 – 20 lakh: 20% tax
20 – 24 lakh: 25% tax
Above 24 lakh: 30% tax
Earlier tax slab (for FY 2024-25)
Up to ₹3 lakh – No tax
₹3 lakh – ₹7 lakh 5%
₹7 lakh – ₹10 lakh 10%
₹10 lakh – ₹12 lakh 15%
₹12 lakh – ₹15 lakh 20%
Above ₹15 lakh 30%
The rebate that makes income up to ₹12 lakh tax-free
The confusion arises because the new structure offers a tax rebate, which effectively cancels out the tax payable for individuals earning up to ₹12 lakh. The new structure does not categorically mention zero tax till ₹12 lakh income. Here’s how it works:
For a person earning ₹12 lakh per year, the tax calculation based on the old slabs would be:
₹0 – ₹4 lakh: No tax
₹4 lakh – ₹8 lakh: 5 per cent tax on ₹4 lakh = ₹20,000
Summary: The new income tax rebate up to ₹12 lakh is now simpler with updated slabs for easier understanding.