Individuals earning up to ₹12 lakh annually will not have to pay any income tax under the new tax regime as Finance Minister Nirmala Sitharaman on Saturday gave relief to middle class by raising exemption limit and rejigging slabs.
For salaried employees, this nil tax limit will be ₹12.75 lakh per annum, after taking into account a standard deduction of ₹75,000.
Higher exemptions and rejigs have been effected under the new income tax regime.
"I am now happy to announce that there will be no income tax payable up to income of ₹12 lakh (i.e. average income of ₹1 lakh per month other than special rate income such as capital gains) under the new regime," the finance minister said.
"The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment," Sitharaman said in her Budget speech.
As per the rejig, for people earning more than ₹12 lakh per annum, there will be nil tax for income up to ₹4 lakh, 5 per cent for income between ₹4 and 8 lakh, 10 per cent for ₹8-12 lakh, 15 per cent for ₹12-16 lakh.
A 20 per cent income tax will be levied on income between ₹16 and 20 lakh, 25 per cent on ₹20-24 lakh and 30 per cent above ₹24 lakh per annum.
A tax payer in the new regime with an income of ₹12 lakh will get a benefit of ₹80,000 in tax. A person having income of ₹18 lakh will get a benefit of ₹70,000 in tax.
A person with an income of ₹25 lakh gets a benefit of ₹1.10 lakh.