Finance Minister Nirmala Sitharaman, during her Union Budget speech on February 1, announced that individuals with an annual income of up to Rs 12 lakh will be exempt from paying income tax under the new tax regime. For salaries individuals, the exemption limit is Rs 12.75 lakh with standard deduction of Rs 75,000.
The Finance Minister also unveiled a revised tax slabs and rates under the new tax regime.
New Tax Slabs
| Income Range | Tax Rate |
|---|---|
| Rs 0 to Rs 4 lakh | Nil |
| Rs 4 lakh to Rs 8 lakh | 5% |
| Rs 8 lakh to Rs 12 lakh | 10% |
| Rs 12 lakh to Rs 16 lakh | 15% |
| Rs 16 lakh to Rs 20 lakh | 20% |
| Rs 20 lakh to Rs 24 lakh | 25% |
| Above Rs 24 lakh | 30% |
Income Tax: What’s The Math?
With the new tax slabs and exemption in place, the income of up to Rs 12 Lakhs Per Annum will become tax-free. This means that individuals earning up to Rs 12 Lakhs Per Annum will have to pay 0 tax on their earning. However, if an individual is earning slightly highly than this income, he/she has the tax liabilities.
For example, if an individual earns Rs 12.1 Lakhs annually (without claiming standard deduction of Rs 75,000 for salaried employees), he/she is liable to pay a tax of Rs 61,500.
Given below is the math explaining this calculation.
At the income of Rs 12.1 lakhs per annum.
| Income Range | Tax Rate | Tax Amount |
|---|---|---|
| Rs 0–4 lakh | 0% | Rs 0 |
| Rs 4–8 lakh | 5% | Rs 20,000 |
| Rs 8–12 lakh | 10% | Rs 40,000 |
| Rs 12–12.1 lakh | 15% | Rs 1,500 |
| Total Tax Liability | Rs 61,500 |
(Disclaimer: The above calculation is valid for the individuals who have not claimed the standard deduction of Rs 75,000 under the new tax regime. The tax liability becomes zero for salaried individuals earning Rs 12.75 lakhs with claiming Rs 75,000 as the standard deductions.)
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