The Union Budget 2025-26 has introduced significant changes to the tax structure, especially benefiting the middle class.
Finance Minister Nirmala Sitharaman's announcement has revamped the New Tax Regime, bringing notable relief for taxpayers, particularly those earning up to Rs 12 lakh annually.
Key changes in the new tax regime:
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No Tax on Income Up to Rs 4 Lakh: Under the new tax slabs, there will be no tax on annual incomes up to Rs 4 lakh.
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Revised Slabs:
- Income from Rs 4 Lakh to Rs 8 Lakh: Taxed at 5%.
- Income from Rs 8 Lakh to Rs 12 Lakh: Taxed at 10%.
- Progressive Tax Rates: For income above Rs 12 Lakh, tax rates gradually increase:
- 15% on income between Rs 12 lakh to Rs 16 lakh.
- 20% on income between Rs 16 lakh to Rs 20 lakh.
- 25% on income between Rs 20 lakh to Rs 24 lakh.
- 30% for income exceeding Rs 24 lakh.
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Tax Savings: The new slabs will provide significant savings for taxpayers. For example:
Advertisement- Rs 80,000 savings for those earning Rs 12 lakh annually.
- Rs 70,000 savings for Rs 18 lakh annual income.
- Rs 1,10,000 savings for those earning Rs 25 lakh.
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Tax Rebate: The tax rebate under Section 87A has been increased, meaning individuals with net taxable income up to Rs 12 lakh will not need to pay any income tax. Salaried individuals benefiting from both the new tax slabs and the enhanced rebate will effectively pay no tax on their earnings up to Rs 12 lakh.
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Capital Gains Tax: Income from capital gains will not be eligible for the new tax rebate and will be taxed separately under different rules.
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Effective Date: The revised tax structure will come into effect from the new financial year, starting April 1, 2025, once it is passed by Parliament.
Comparison with the Old Regime:
- Under the old tax regime, the exemption limit was Rs 2.5 lakh, and income between Rs 2.5 lakh and Rs 5 lakh was taxed at 5%. Income between Rs 5 lakh and Rs 10 lakh attracted a 20% tax, while income above Rs 10 lakh was taxed at 30%.
In conclusion, the new tax regime provides significant relief to the middle class, especially with the increase in exemption limits, revised tax slabs, and a higher tax rebate, making it a more attractive option for many taxpayers.
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