In a historic Budget session, Union Finance Minister Nirmala Sitharaman on Saturday presented the Union Budget for 2025-2026, giving substantial relief to income taxpayers.
The Finance Minister declared that income up to Rs. 12 lakh would not be taxable for the individuals. However, the tax slabs seem to be different and claim a 10% tax on incomes up to Rs. 12 lakh. Thus, the question is: are taxpayers still liable to pay the 10% tax upto Rs. 12 lakh income?
Take a look at the new Tax Slabs:
- Rs. 0 to Rs. 4 Lakhs – Nil
- Rs. 4 Lakhs to Rs. 8 Lakhs – 5%
- Rs. 8 Lakhs to Rs. 12 Lakhs – 10%
- Rs. 12 Lakhs to Rs. 16 Lakhs – 15%
- Rs. 16 Lakhs to Rs. 20 Lakhs – 20%
- Rs. 20 Lakhs to Rs. 24 Lakhs – 25%
- Above Rs. 24 Lakhs – 30%
Tax Rebate for People Earning Less Than Rs. 12 Lakh
The government has introduced a reduction in the slab rate and tax rebate for taxpayers with incomes up to Rs. 12 lakh (excluding special rate income like capital gains), thus making “there will be no tax payable by them,” Sitharaman confirmed in her Budget speech.
Clarification on Tax on Rs. 12 Lakh Income
Under the new tax structure, individuals earning up to Rs. 12 lakh per annum will not pay any tax. Earlier, a person earning Rs. 12 lakh would have to pay Rs. 80,000 in taxes, but now, with the proposed tax cut, the liability would be Rs. 60,000. After availing the tax rebate, only Rs. 20,000 would be left, which would be exempted. This would mean that the net tax payable would be zero for these individuals.
In simpler terms, a tax rebate of Rs. 75,000 is being granted by the government, meaning taxpayers with an annual income up to Rs. 12.75 lakh will be tax-free.
“The middle class provides strength to the economy. In recognition of their contribution, we have periodically reduced the tax burdens. I am now happy to announce that there will be no income tax up to an income of Rs. 12 lakhs,” Sitharaman said.
Tax Liabilities based on Salary
The Finance Ministry elaborated on the tax implications based on annual salaries as follows:
- Those with an annual salary of up to Rs. 12 lakh will not have to pay tax.
- Those earning Rs. 16 lakh annually will save Rs. 50,000 in taxes.
- Those earning Rs. 20 lakh annually will save Rs. 90,000.
Tax Relief for the Middle Class
“The new structure will significantly ease the taxes of the middle class and leave more money in their hands, boosting household consumption, savings, and investment,” Sitharaman said in her speech. The initiative is geared toward helping the middle class while also stimulating economic growth through increased disposable income.
