Sun Feb 02 12:38:25 UTC 2025: **India Announces Major Income Tax Changes in Budget 2025**

NEW DELHI – Finance Minister Nirmala Sitharaman announced significant changes to India’s income tax system in the Union Budget 2025, offering substantial relief to the middle and salaried classes. The headline change is the elimination of income tax for individuals earning up to ₹12 lakh annually. Salaried individuals will enjoy tax exemption up to ₹12.75 lakh.

While new tax slabs show a graduated tax system (0% up to ₹4 lakh, 5% between ₹4-8 lakh, 10% between ₹8-12 lakh, and progressively higher rates thereafter), the government clarified that this is due to a tax rebate under Section 87A of the Income Tax Act. This rebate effectively eliminates tax liability for individuals earning up to ₹12 lakh.

For example, while an individual earning between ₹4-8 lakh would technically owe ₹20,000 in tax, and someone earning ₹8-12 lakh would owe ₹40,000, the ₹60,000 total rebate under Section 87A nullifies this. The government increased the rebate amount to ensure tax-free income up to ₹12 lakh.

The difference between tax exemption and tax rebate was highlighted. Tax exemption eliminates tax liability entirely on specific income levels, while a tax rebate reduces the tax payable even if income exceeds a certain threshold. The new changes emphasize a tax rebate system to achieve this tax-free income bracket.

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