New Tax Regime: No Tax Up to ₹12.75 Lakh, Clarifies Sitharaman

New Delhi: Finance Minister Nirmala Sitharaman has announced a major update in the new tax regime, revealing that no tax will be payable on income up to ₹12 lakh. Including the standard deduction of ₹75,000, individuals earning up to ₹12.75 lakh annually will not have to pay any tax. The tax slabs have also been revised, but confusion persists regarding taxation on income between ₹4 lakh and ₹8 lakh, which is subject to 5% tax.

Under the new tax regime, exemptions are not applicable, and tax is calculated based on gross income. For instance, if an individual earns ₹12.75 lakh per annum, the standard deduction of ₹75,000 brings the taxable income down to ₹12 lakh. Tax calculations indicate that ₹60,000 is payable, but this amount is entirely waived under Section 87A of the Income Tax Act. However, if gross income exceeds ₹12.75 lakh, the rebate is not applicable, and tax is levied based on the revised slabs.

With the new rules, the tax-exempt income threshold stands at ₹7.75 lakh, factoring in a ₹25,000 rebate under Section 87A. This revision aims to simplify tax calculations and benefit middle-income earners.