Sun Apr 06 21:00:00 UTC 2025: **India’s New Tax Regime Explained: No Tax Up to ₹12.75 Lakh, But with Nuances**
NEW DELHI, April 7, 2025 – India’s Finance Minister Nirmala Sitharaman’s Union Budget 2025 introduced a revised tax regime offering significant tax benefits for salaried individuals. Under the New Tax Regime (NTR), no income tax is levied on annual income up to ₹12,00,000. Factoring in the standard deduction of ₹75,000, this effectively extends the no-tax limit to ₹12,75,000.
The new tax slabs are structured with equal ₹4 lakh intervals: 0-4 lakh (0%), 4-8 lakh (5%), 8-12 lakh (10%), 12-16 lakh (15%), 16-20 lakh (20%), 20-24 lakh (25%), and above ₹24 lakh (30%). A crucial element is the introduction of a rebate under Section 87A, offering a ₹60,000 discount on taxable income up to ₹12,00,000. This effectively means zero tax for those within this limit, despite the tiered structure of the slabs.
However, the system includes complexities. While the no-tax limit is ₹12,00,000, the initial tax slab only shows 0% tax up to ₹4 lakh. This is because the rebate is not directly deducted from the income but acts as a discount after tax calculation.
For incomes slightly above ₹12,00,000 but below ₹12,75,000, a “marginal relief” provision ensures a reduced tax burden. This relief is calculated by subtracting the amount exceeding the ₹12,00,000 limit from the total calculated tax. For incomes exceeding ₹12,75,000, neither the rebate nor marginal relief applies. Individuals can, however, reduce their tax liability by claiming deductions for contributions to the National Pension Scheme under Section 80CCD(2).
The choice between the Old and New Tax Regimes remains optional, depending on individual circumstances and financial goals. Further clarification on the intricacies of the new regime is available from certified wealth managers.
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