Sun Feb 02 12:40:00 IST 2025: **India Announces Major Income Tax Changes in Budget 2025-26**

NEW DELHI – The Indian government unveiled significant revisions to its income tax structure in the latest budget, with Finance Minister Nirmala Sitharaman announcing a zero-tax regime for individuals earning up to ₹12 lakh annually. This move, aimed at boosting domestic consumption and savings, is a key feature of the new tax regime.

While the ₹12 lakh figure is widely publicized, it’s crucial to understand that this isn’t a simple deduction from higher incomes. The ₹12 lakh exemption only applies to those whose *taxable* income falls within that limit. A standard deduction of ₹75,000 further increases this effective limit to ₹12.75 lakh. Individuals earning more will still be taxed according to a revised slab system.

The new system features revised tax brackets: 0% up to ₹4 lakh, 5% for ₹4-8 lakh, 10% for ₹8-12 lakh, 15% for ₹12-16 lakh, 20% for ₹16-20 lakh, 25% for ₹20-24 lakh, and a flat 30% above ₹24 lakh. Tax is calculated by applying the relevant rate to each income bracket, not as a flat rate on the entire income.

For example, an individual with a taxable income of ₹15 lakh would pay ₹1.05 lakh in tax under the new regime: ₹0 (0-4 lakh), ₹20,000 (4-8 lakh), ₹40,000 (8-12 lakh), and ₹45,000 (12-16 lakh). This contrasts with the approximately ₹1.4 lakh tax liability under the existing system. The ₹12 lakh tax-free income is achieved through a rebate, not an exemption.

While the new regime simplifies taxation for many, the existing system with its higher tax rates but potential for exemptions remains an option. The government has not announced any changes to the old regime, leaving taxpayers the choice of which system best suits their financial circumstances.

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