New Delhi:
The highlight of Finance Minister Nirmala Sitharaman’s eighth consecutive Budget is the relief to middle-class taxpayers from the salaried class. But the Budget speech, which also announced revised tax slabs, has left many confused over the relief they will be getting.
NDTV answers taxpayers’ big Budget questions
What Are The New Tax Slabs?
The tax slabs under the new regime have been revised in Budget 2025. A salaried individual will pay zero tax for annual income up to Rs 4 lakh. In the Rs 4 lakh – to Rs 8 lakh bracket, 5 per cent income tax will be applied. This rate would rise to 10 per cent in the Rs 8 lakh – Rs 12 lakh bracket. The tax rates for the brackets of Rs 12 lakh-Rs 16 lakh, Rs 16 lakh-Rs 20 lakh and Rs 20 lakh-Rs 24 lakh are 15 per cent, 20 per cent and 25 per cent, respectively. Follow Union Budget 2025-26 LIVE UDPATES here
How Have The Slabs Changed?
The zero tax ceiling has been raised from Rs 3 lakh to Rs 4 lakh. The 5 per cent tax bracket is now Rs 4 lakh – Rs 8 lakh, up from Rs 3 lakh – Rs 7 lakh earlier. The Rs 7 lakh – Rs 10 lakh slab, which attracted tax at 10 per cent, is now revised to Rs 8 lakh – Rs 12 lakh. The Rs 12 lakh – Rs 15 lakh bracket, which is taxed at 15 per cent, has been revised to Rs 12 lakh – Rs 16 lakh. The 30 per cent tax slab on the income of over Rs 15 lakh has now been broken down. The Rs 16 lakh-Rs 20 lakh bracket will now be taxed at 20 per cent, Rs 20 lakh-Rs 24 lakh at 25 per cent and income above Rs 24 lakh at 30 per cent.
How Will Income Up To Rs 12 Lakh Be Tax-Free?
According to the Budget document, the government will provide rebates to those earning up to Rs 12 lakh. For salaried individuals, this threshold is Rs 12.75 lakh, including the standard deduction of Rs 75,000. The Budget document has a table that illustrates the government’s rebates, starting from Rs 10,000 for an income of Rs 8 lakh and rising to Rs 80,000 for an individual making Rs 12 lakh.
If Salary Is 16 Lakh Per Annum, How Will Tax Be Calculated?
If an annual income of Rs 16 lakh is taken as an example, there will be zero tax up to Rs 4 lakh. Then, in the Rs 4 lakh-Rs 8 lakh bracket, a 5 per cent tax will be levied – Rs 20,000. In the Rs 8 lakh-Rs 12 lakh bracket, there will be a 10 per cent tax – Rs 40,000. And in the Rs 12 lakh – Rs 16 lakh slab, the rate is 15 per cent — meaning Rs 60,000. So, you will pay a total tax of Rs 1,20,000. This is Rs 50,000 less than what you are currently paying.
If Salary Is Rs 50 Lakh, Then What?
For high-salaried individuals, the new slabs provide a benefit of over Rs 1 lakh. Taking an example, an individual earning Rs 50 lakh per annum, will now be paying income tax of Rs 10,80,000 as per the revised slabs, Rs 1,10,000 less than what he currently pays. That effectively means the new slabs are aimed at putting more money in the hands of the middle-income group to boost consumption and provide marginal relief to high-salaried individuals.
What About Old Tax Regime?
The Budget document specifies that the new slabs are for those opting for the New Tax Regime, in line with the Centre’s push for this new regime that aims to simplify personal tax by doing away with the complications of exemptions.The Budget document has no mention of the old tax regime. However, later Ms Sitharaman clarified this during her interaction with the media this evening. Asked if the old regime is being discontinued, she replied in the negative and said she would have announced if this was the case. Top government officials said nearly 75 per cent taxpayers have moved to the new regime. This means the government won’t scrap the regime but let it fade away as people move to the new regime.
Should You Switch From Old To New Tax Regime?
The decision on whether you should opt for the new regime would depend on your financial profile and how much exemption you can claim under the old regime. For example, if your income is Rs 16 lakh and you show exemptions of Rs 4 lakh, your taxable income will be Rs 12 lakh. Now, according to the old tax regime slabs, you would pay a total income tax of Rs 1,72,500 — Rs 52,000 more than what you will pay under the new regime.
Divya Baweja, Partner, Deloitte India, told NDTV, “To decide whether to opt for the old regime or the new regime, one would need to see that if a taxpayer were to follow the old regime, what kind of deductions or exemptions he/she should be looking at to claim benefit akin to the new regime. That comparison factor would be based on the specific individual scenario. Basis the same, one would need to evaluate the regime which is more beneficial With the widening of the slabs in the new regime, the taxpayer would need to have higher deductions or exemptions to equate the tax under the new regime.”
