In the most awaited development of 2025, that is, the Union Budget, Finance Minister Nirmala Sitharaman has raised the limit of income tax rebate from ₹7 lakh to ₹12 lakh, which essentially means that if an individual has an income of up to ₹12 lakh, s/he will have zero tax liability.
But does that mean that those earning ₹15 lakh will have to pay tax on only ₹3 lakh?
The answer is No.
The rebate is only applicable for those earning up to ₹12 lakh. If your taxable income is even a rupee more than ₹12 lakh, one will have to pay taxes as per the slab rates under the new tax regime.
Earlier, those earning up to ₹12 lakh paid a tax of ₹80,000 under the new tax regime.
This means that if your taxable income is, say, ₹12.1 lakh, your tax liability would be ₹61,500.
This is because, if your income is above ₹12 lakh you will have to pay a tax of 5 per cent on income between ₹ four to 8 lakh; 10 per cent on income between ₹8 lakh to 12 lakh and 15 per cent between ₹12 lakh to 16 lakh.
So an individual earning ₹15 lakh will end up paying a tax of ₹1,05,000.
Benefit of earning above ₹15 lakh?
FM Nirmala Sitharaman has provided significant savings for even those earning above ₹15 lakh by way of sharp cut in tax rates for incomes falling between ₹15 lakh and ₹24 lakh.
While earlier, in the new tax regime, incomes above ₹15 lakh were taxed at 30 per cent, the FM has proposed to tax incomes between ₹12 lakh to 16 lakh at 15 per cent; income between ₹16 lakh and 20 lakh at 20 per cent; and that between ₹20 lakh and 24 lakh at 25 per cent. Now, 30 per cent rate will be applicable only for income above ₹24 lakh.
The FM has announced that those earning above ₹24 lakh will have savings of up to ₹1.1 lakh under the new tax regime.
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