Individuals with an annual income of up to ₹12 lakh will not have to pay any income tax under the new tax regime, as Finance Minister Nirmala Sitharaman on Saturday provided relief to the middle class by raising the exemption limit and restructuring tax slabs.
For salaried employees, this nil tax limit will be ₹12.75 lakh per annum after factoring in a standard deduction of ₹75,000.
The increased exemptions and revised tax slabs have been introduced under the new income tax regime.
"I am now pleased to declare that no income tax will be payable on an income of up to ₹12 lakh—that is, an average income of ₹1 lakh per month—other than special rate income such as capital gains, under the new regime," said the Finance Minister.
"The new structure will significantly reduce taxes for the middle class, leaving more money in their hands, boosting household consumption, savings, and investment," Sitharaman stated in her Budget speech.
According to the revised structure, individuals earning up to ₹12 lakh per year will pay no tax. For those earning above ₹12 lakh, the tax rates are as follows:
- ₹4 lakh will remain tax-free,
- 5% for income between ₹4-8 lakh,
- 10% for income between ₹8-12 lakh,
- 15% for income between ₹12-16 lakh,
- 20% for income between ₹16-20 lakh,
- 25% for income between ₹20-24 lakh, and
- 30% for income above ₹24 lakh per year.
Under the new tax regime, an individual with an annual income of ₹12 lakh will receive a tax benefit of ₹80,000. A person earning ₹18 lakh will benefit from a tax reduction of ₹70,000.
An individual with an income of ₹25 lakh will receive a tax benefit of ₹1.10 lakh.
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