Starting April 1, 2025, new IT laws were put into place. These new changes include updated income tax rates and better benefits for those looking for high rebates, making it easier for certain individuals to save on their taxes.
Finance Minister Nirmala Sitharaman announced such amendments in the union budget aimed at increasing the disposable income and mitigating the impact of inflation.
As per the revised income tax rates of the new regime, the full tax rebate advantage has surged to an income of Rs 12 lakh. The same direction states that an income of up to Rs 12,00,000 shall not draw any taxes under the new tax regime.
For the salaried class, the same limit has been extended to Rs 12.75 lakh with an additional Rs 75,000 standard deduction provision to lessen the tax obligation.
The updated taxation regulation mentioned that any income exceeding Rs 12 lakh (Rs 12.75 lakh for salaried individuals) shall be subject to tax on the whole income. The new tax regime secures a basic exemption limit of Rs 4 lakh. It directed that the tax began applying post the first Rs 4,00,000 income.
Income Tax Slabs Under New Tax Regime:
- Rs 0-4 lakh: Nil (No tax)
- Rs 4-8 lakh: 5% tax
- Rs 8-12 lakh: 10% tax
- Rs 12-16 lakh: 15% tax
- Rs 16-20 lakh: 20% tax
- Rs 20-24 lakhs: 25% tax
- Above Rs 24 lakh: 30% tax
For example, an income of Rs 12 lakh draws a tax of Rs 80,000 till now. But the revised slabs shall lessen the same obligation to Rs 60,000. It directed that an advantage of Rs 20,000 under the revised rates.
Also, since an income of Rs 12 lakh arrived with a full rebate advantage, the taxpayers will not need to file a Rs 60,000 tax obligation within the updated structure. Therefore, their net tax amounts to zero.
In What Way Shall the Tax be Computed for Rs 12.80 Lakh?
For the salaried class taxpayers, a standard deduction of Rs 75,000 would assist them in nullifying their tax liability up to the income of Rs 12.75 lakh. However, if someone secures a salary of Rs 12.80 lakh, they will be required to file tax on their entire income, after considering the standard deduction of Rs 75,000 but subject to marginal relief.
It is directed that an income of Rs 12.80 lakh secures a net taxable income of Rs 12.05 lakh.
Tax on an income of Rs 12.05 lakh based on the given tax slabs:
- Rs 0-4 lakh: No tax
- Rs 4-8 lakh: 5% of Rs 4 lakh = Rs 20,000
- Rs 8-12 lakh: 10% of Rs 4 lakh = Rs 40,000
- Rs 12-12.05 lakh: Rs 5,000 taxed at 15% = Rs 750
Total tax = Rs 20,000 + Rs 40,000 + Rs 750 = Rs 60,750
But in this case, the incremental income is Rs 5000, so the tax will be levied only up to the amount of Rs 5000, as rebate 87A will be available for the tax amount of Rs 55750.
Hence, the tax on an income of Rs 12.05 lakh is Rs 5000.
For Example, a Tax on Rs 13.50 Lakh Income for the Salaried Class:
Total taxable income after deduction:
Rs 13,50,000 – Rs 75,000 = Rs 12,75,000
Total tax based on new regime rates:
- Rs 0-4 lakh: No tax
- Rs 4-8 lakh: 5% of Rs 4 lakh = Rs 20,000
- Rs 8-12 lakh: 10% of Rs 4 lakh = Rs 40,000
- Rs 12-12.75 lakh: Rs 0.75 lakh taxed at 15% = Rs 11,250
Total tax = Rs 20,000 + Rs 40,000 + Rs 11,250 = Rs 71,250
Therefore, the tax on Rs 13.50 lakh after the Rs 75,000 standard deduction is Rs 71,250.
Calculating income tax on a large salary manually is difficult, but SAG Infotech’s Gen Income Tax software makes it easier and faster under both the old and new tax regimes.
