Finance Minister Nirmala Sitharaman has made a significant announcement in her budget speech, providing relief to the middle class. She declared that income up to ₹12 lakh is now tax-free. Additionally, taxpayers will benefit from a ₹75,000 standard deduction. Let’s understand the latest changes in the tax slabs and calculate how much tax needs to be paid on different income levels and how much savings can be expected.
Tax on Income Above ₹12 Lakh
During her budget speech, Nirmala Sitharaman announced a new tax slab system. As per the new rules, income up to ₹12.75 lakh (including standard tax deductions) is now tax-free. This decision will leave more money in the hands of the middle class. According to the revised tax calculation, income up to ₹12 lakh is now completely tax-free. However, if the income is ₹13 lakh, then earnings up to ₹16 lakh will fall under the 15% tax slab.
Introduction of the 25% Tax Slab
The government has also introduced a new 25% tax slab. As per the updated tax structure:
- Income between ₹16 lakh and ₹20 lakh will be taxed at 20%.
- Income between ₹20 lakh and ₹24 lakh will be taxed at 25%.
- Income above ₹24 lakh will be taxed at 30%.
Also Read- 5 Income Tax Changes to Expect from Budget 2025
Tax Savings Calculation
Under the new tax slabs:
- A person earning ₹12 lakh will save ₹80,000, which was previously payable as tax.
- If the income is ₹16 lakh, the savings will be ₹50,000.
- If the income is ₹18 lakh, the savings will be ₹70,000.
- If the income is ₹20 lakh, the savings will be ₹90,000.
- If the income is ₹25 lakh or more, the savings will be ₹1.10 lakh.
How Different is the New Tax Slab from the Old One?
Last year, the government had made some changes under the New Tax Regime, and now it has introduced further modifications.
New Tax Slab (2024)
- ₹0 to ₹4 lakh – No tax
- ₹4 lakh to ₹8 lakh – 5%
- ₹8 lakh to ₹10 lakh – 10%
- ₹12 lakh to ₹16 lakh – 15%
- ₹16 lakh to ₹20 lakh – 20%
- ₹20 lakh to ₹24 lakh – 25%
- Above ₹24 lakh – 30%
Old Tax Slab
- ₹0 to ₹3 lakh – No tax
- ₹3 lakh to ₹7 lakh – 5%
- ₹7 lakh to ₹10 lakh – 10%
- ₹10 lakh to ₹12 lakh – 15%
- ₹12 lakh to ₹15 lakh – 20%
- Above ₹15 lakh – 30%
These changes aim to benefit the middle class by reducing the tax burden and increasing their disposable income.