New Delhi: Finance Minister Nirmala Sitharaman has announced major tax relief in the Union Budget 2025. A key highlight is that individuals earning up to Rs 12 lakh will not have to pay any income tax.
The tax slab structure under the new income tax regime has also been revised. The nil tax slab has been extended from Rs 0-3 lakh to Rs 0-4 lakh.
Tax-Free Up to Rs 4 Lakh or Rs 12 Lakh?
The announcements have created some confusion. The new tax slab states that no tax will be charged on income up to Rs 4 lakh. However, the government has also said that income up to Rs 12 lakh will be tax-free.
Experts clarify that Rs 4 lakh is the threshold where no tax is calculated at all. Beyond this, tax is computed as per slabs, but a rebate under Section 87A ensures that the final tax liability becomes zero for incomes up to Rs 12 lakh.
New Income Tax Slabs:
- Rs 0 – 4 lakh: No tax
- Rs 4 – 8 lakh: 5%
- Rs 8 – 12 lakh: 10%
- Rs 12 – 16 lakh: 15%
- Rs 16 – 20 lakh: 20%
- Rs 20 – 24 lakh: 25%
- Above Rs 24 lakh: 30%
How Does It Work?
If a person earns Rs 12 lakh, tax is calculated based on the slabs. However, a rebate equal to the tax amount is applied under Section 87A, making the final tax payable zero.
Experts say that while the new structure benefits middle-class taxpayers, those earning above Rs 12 lakh will still have to pay tax as per slabs.
This move is expected to provide significant relief to salaried individuals and boost disposable income.
