The government has revised the tax structure under the new regime with Finance Minister Nirmala Sitharaman announcing that those earning up to Rs 12 lakh annually won’t have to pay any income tax. The proposed changes are part of the latest Budget, which seeks to reduce taxes and leave taxpayers with money in hand. The Finance Minister said this will boost domestic consumption and savings.
But does the tax exemption of up to Rs 12 lakh income mean that a salaried person earning Rs 15 lakh will be taxed only on the remaining Rs 3 lakh? No. The exemption limit exists only for those earning up to Rs 12 lakh. Those with higher taxable income must follow the slab-wise taxation process.
It is also important to clarify that the income mentioned here is the taxable amount since taxpayers also enjoy an additional standard deduction of Rs 75,000 under the new regime. In practical terms, this will increase the exemption limit to Rs 12,75,000.
The Proposed Tax Slabs
The government has proposed a revised structure under which the tax slabs have been further broken down. The first slab is up to Rs 4 lakh, in which the tax remains nil. Earlier it was Rs 3 lakh. The next slab is Rs 4-8 lakh where the tax rate is 5%, followed by 10% in the Rs 8-12 lakh slab, 15% in the Rs 12-16 lakh slab, 20% in the Rs 16-20 lakh slab, and 25% in the Rs 20-24 lakh slab. It’s flat 30% above Rs 24 lakh.
