Income Tax Relief 2025 Finance Minister Nirmala Sitharaman has made income up to Rs 12 lakh per annum tax free in the budget. If you add the standard deduction of Rs 75 thousand to this, then you will not have to pay any tax on income of Rs 12.75 lakh. Let us know how income up to Rs 12.75 lakh will be tax free and how you will get its benefits.
Finance Minister Nirmala Sitharaman has given a big relief to the middle class in the budget. She has made annual income up to Rs 12 lakh tax free. If the standard deduction of Rs 75000 is also included, then a total income of up to Rs 12.75 lakh will be tax free.
However, in the new tax regime, the annual income of Rs 12 lakh is still falling in the 10 percent tax slab. Due to this, taxpayers are confused as to how their income of Rs 12.75 lakh will be tax free. Let us understand this in detail.
How much tax is levied in the new tax regime?
Currently, according to the new tax regime, tax is zero on 0-4 lakh rupees. At the same time, 5 percent tax is levied on income of 4 to 8 lakh rupees and 10 percent tax is levied on 8 to 12 lakh rupees. The highest tax of 30 percent will be levied on annual income of more than 24 lakh rupees.
How will income of Rs 12.75 lakh be tax free?
- Under Section 87A of Income Tax, taxpayers get tax rebate. This is Rs 12,500 for the old tax regime and Rs 60,000 for the new tax regime. This simply means that if your tax liability in the new tax regime is less than Rs 60,000, then you do not need to pay a single rupee of tax.
- According to this, your annual income up to 12 lakhs will be tax free. Understand it this way that income of 0-4 lakhs is tax free. Whereas, 5% will be charged on 4 to 8 lakhs.
- This means that your tax liability on this four lakhs will be Rs 20,000. On the next four lakhs i.e. 8 to 12 lakhs, you will have to pay 10% tax, which is Rs 40,000.
- This means that you will have to pay a tax of Rs 60,000 on an annual income of Rs 12 lakh, on which the government is giving a direct exemption. If you add a standard deduction of Rs 75,000 to this, then an annual income of up to Rs 12.75 lakh will be tax free.
How to get the benefit of tax rebate
You have to file Income Tax Return (ITR) to claim tax rebate under section 87A. The rebate amount will be credited directly to your account after your ITR is cleared.
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