Summary:
- The Finance Minister announced a significant tax relief under the new regime, allowing nil tax for incomes up to Rs 12 lakh, with a Rs 12.75 lakh exemption for salaried employees after the standard deduction.
- Despite the announcement, confusion arose due to the presence of a 10% tax slab for income between Rs 8 lakh and Rs 12 lakh, which applies when income exceeds Rs 12 lakh.
- The new tax structure includes progressive slabs beyond Rs 12 lakh, with tax rates ranging from 5% to 30%, depending on income levels.
Finance Minister Nirmala Sitharaman, in the latest Union Budget announcement, provided substantial relief to the middle class by introducing a complete tax exemption for incomes up to Rs 12 lakh under the new tax regime. Salaried employees, benefiting from a standard deduction of Rs 75,000, can enjoy a tax-free income limit of Rs 12.75 lakh.
However, soon after the announcement, concerns were raised regarding an apparent contradiction. DMK MP Dayanidhi Maran pointed out that while the Finance Minister declared nil tax for incomes up to Rs 12 lakh, the tax slab chart indicated a 10% tax rate for incomes between Rs 8 lakh and Rs 12 lakh. This created widespread confusion among taxpayers, leading to multiple queries on social media.
To clarify, the new regime introduces a structured slab system. For individuals earning more than Rs 12 lakh annually, taxation is applied as follows:
- No tax on income up to Rs 4 lakh.
- 5% tax on income between Rs 4 lakh and Rs 8 lakh.
- 10% tax on income from Rs 8 lakh to Rs 12 lakh.
- 15% tax on income between Rs 12 lakh and Rs 16 lakh.
- Higher tax slabs of 20%, 25%, and 30% apply to incomes above Rs 16 lakh.
For instance, an individual earning Rs 13 lakh annually will be taxed based on the structured slabs. After deducting the Rs 75,000 standard deduction, the taxable income is Rs 12.25 lakh. Taxes are applied progressively, amounting to Rs 63,750 plus health and education cess.
Conclusion:
The recent budget announcement aims to provide tax relief for middle-class taxpayers while maintaining a progressive structure for higher income groups. Although the new regime offers significant benefits, understanding the detailed slab system is crucial for taxpayers to assess their liabilities accurately.
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