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The income up to Rs 12 lakh is tax free due to the rebate under Section 87A of the Income Tax Act, 1961. The revised income slabs will be applicable on those earning above Rs 12 lakh under the new tax regime. know how:
Income Tax Changes In Budget 2025.
The Union Budget 2025-26 has provided a much-needed relief to the middle man by increasing their disposable income. The most significant takeaway from this budget is that taxpayers earning up to Rs 12 lakh will effectively pay zero tax, but do the latest slabs mention tax on income below Rs 12 lakh?
It is important to know that the income up to Rs 12 lakh is tax free due to the rebate under Section 87A of the Income Tax Act, 1961 (not exemption!). It means that those earning above Rs 12 lakh will have to pay tax on the entire income in FY2025-26, excluding a standard deduction of Rs 75,000 and a marginal relief of nearly Rs 30,000 (if applicable).
In simple words, roughly, a total income up to Rs 13 lakh (including a rebate of Rs 12 lakh, standard deduction of Rs 75,000, and a marginal relief of about Rs 30,000) will be tax free. However, any income above this will attract tax on the full income based on the revised slabs.
Now, when income tax is calculated, it is broken into parts as per slab rates. For example, for those earning Rs 16 lakh a year, thier income will be broken into four parts (zero-Rs 4 lakh, Rs 4 lakh to Rs 8 lakh, Rs 8 lakh to Rs 12 lakh, Rs 12 lakh to Rs 16 lakh).
On the zero-Rs 4 lakh income, there will be no tax (it’s called exemption. It is applicable to all irrespective of the income level); on income between Rs 4 lakh and Rs 8 lakh, there will be 5% tax (Rs 20,000 taxon this Rs 4 lakh income); 10% tax on income between Rs 8,00,001 to Rs 12,00,000 (Rs 40,000); 15% tax on addtional Rs 4 lakh for income between Rs 12 lakh and Rs 16 lakh (Rs 60,000).
So, a person earning Rs 16 lakh in the financial year 2025-26 will have to pay Rs 1,20,000, which is a benefit of Rs 50,000 as compared with earlier tax rates and slabs.
So, the tax slabs for incomes below Rs 12 lakh is not for those earning below Rs 12 lakh. It is for the tax calculation for those earning above Rs 12 lakh in a year.
The revised slabs for FY26 are as follows:
Income up to Rs 4,00,000: Nil
Income from Rs 4,00,001 to Rs 8,00,000: 5%
Income from Rs 8,00,001 to Rs 12,00,000: 10%
Income from Rs 12,00,001 to Rs 16,00,000: 15%
Income from Rs 16,00,001 to Rs 20,00,000: 20%
Income from Rs 20,00,000 to Rs 24,00,000: 25%
Income above Rs 24,00,000: 30%.
