Income Tax Slabs: Income tax free of up to Rs. 12 lakh, yet why is 10% slab? Understand complete calculation

Income tax slabs: Finance Minister Nirmala Sitharaman has made major changes in income tax in this budget, which has given a big relief to the middle class. Now no income tax will have to be paid on the annual income of up to Rs 12 lakh. This decision will benefit millions of taxpayers and increase their savings.

Salary employees and pensioners have been increased to Rs 75,000. Due to this, their tax-free income has increased to Rs 12.75 lakh. If they take advantage of other cuttings, this limit can be even more.

Earlier, income up to Rs 7.75 lakh was not taxed, but now this limit has been increased a big increase. This will not require a large number of people to pay tax.

There is a confusion among people that if tax slabs have been made if you do not have to pay tax on income up to Rs 12 lakh.

Come, let us understand in easy language what it means…

Why will there be no tax on income of 12.75 lakhs? Learn in easy language

Tax account in new tax regime

Income of 0-4 lakh rupees: no tax
Income of Rs 4-8 lakh: 5 percent tax
Income of Rs 8-12 lakh: 10 percent tax
Income of Rs 12-16 lakh: 15 percent tax
Income of Rs 16-20 lakh: 20 percent tax
Income of Rs 20-24 lakh: 25 percent tax
Income of more than Rs 24 lakh: 30 percent tax

Now understand how the income of 12.75 lakhs will be tax free?

The government will give a rebate of Rs 60,000 in the New Tax Regime. This means that if your tax liability is less than Rs 60,000, then you will not have to pay any tax.

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How is tax on income of 12 lakhs:

No tax from 0 to 4 lakh rupees.
5% tax on 4 to 8 lakh rupees = 20,000 rupees
10% tax on 8 to 12 lakh rupees = 40,000 rupees
Total tax liability = Rs 60,000
Under section 87A, there is a provision to waive taxpayers tax of Rs 60,000.

Now add standard deduction of Rs 75,000 to it, then income of Rs 12.75 lakh also becomes tax free.

How will you get the benefit of tax rebate?

Under the New Tax Regime, the government gives taxpayers to taxpayers up to Rs 60,000 through section 87A. This means that if your tax liability is Rs 60,000 or less, then you will not have to pay any tax. For this, you must file income tax return (ITR). When your ITR is cleared, the benefit of the rebate will be transferred to your bank account. Due to this rebate and standard deduction, income up to Rs 12.75 lakh becomes free.

How was it earlier and what has changed now?

Earlier, this discount used to get income up to only Rs 7 lakh and it benefited up to Rs 25,000.
Now those with income up to Rs 12 lakh are getting a tax exemption of Rs 60,000.

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