Finance Minister Nirmala Sitharaman announced in her Budget speech that individuals earning up to Rs 12 lakh per annum will not have to pay any tax after adjusting the Standard Deduction of Rs 75,000 and the revised tax rebate of Rs 60,000. Earlier, the tax rebate of Rs 25,000 was applicable on annual income up to Rs 7 lakh, but now it will apply to income up to Rs 12 lakh.
Tax Calculation for Rs 12.75 lakh annual income
With these changes, individuals with an annual income of up to Rs 12.75 lakh will effectively pay no tax. Here’s how:
Standard Deduction: Rs 75,000
Taxable income after deduction: Rs 12,75,000 – Rs 75,000 = Rs 12,00,000
New Tax Regime slabs:
Income up to Rs 4 lakh: 0% tax → Rs 0
Rs 4 lakh – Rs 8 lakh: 5% tax → Rs 20,000
Rs 8 lakh – Rs 12 lakh: 10% tax → Rs 40,000
Total tax liability before rebate: Rs 20,000 + Rs 40,000 = Rs 60,000
Tax Rebate under Section 87A: Rs 60,000
Final tax liability: Rs 60,000 – Rs 60,000 = NIL
Since there is no tax liability, the take-home salary remains Rs 12.75 lakh per annum.
Tax calculation for Rs 13 lakh annual income
Now, let’s calculate tax for an individual earning Rs 13 lakh per annum under the new tax regime.
Standard Deduction: Rs 75,000
Taxable income after deduction: Rs 13,00,000 – Rs 75,000 = Rs 12,25,000
New Tax Regime slabs:
Income up to Rs 4 lakh: 0% tax → Rs 0
Rs 4 lakh – Rs 8 lakh: 5% tax → Rs 20,000
Rs 8 lakh – Rs 12 lakh: 10% tax → Rs 40,000
Rs 12 lakh – Rs 12.25 lakh: 15% tax → Rs 3,750
Total tax liability before cess: Rs 20,000 + Rs 40,000 + Rs 3,750 = Rs 63,750
Health & Education Cess (4%): Rs 2,550
Total tax liability: Rs 63,750 + Rs 2,550 = Rs 66,300
Net take-home salary:
Rs 13,00,000 – Rs 66,300 = Rs 12,33,700
At first glance, it appears that individuals earning Rs 12.75 lakh take home Rs 12.75 lakh,
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