It is important to know that the income above Rs 12 lakh is tax free due to the rebate under Section 87A of the Income Tax Act, 1961. Those earning above Rs 12 lakh also stands to benefitted due to the revised slabs and rates.
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?
Read More: Income Tax Cuts, Consumption Boost & Industrial Growth: What We Can Expect From Budget 2025
It is important to know that the income above Rs 12 lakh is tax free due to the rebate under Section 87A of the Income Tax Act, 1961. 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. The revised slabs for FY26 are as follows:
Read More: Budget 2025-26: Income Tax Cuts and Increased Gold Tariffs Anticipated, Says Report
- 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%
Read More: ITR Filing Deadline: Last Date To File Belated Income Tax Return, Check Penalty, Other Details
For those earning above ₹12 lakh, the revised tax slabs offer significant benefits:
•₹12 lakh: ₹80,000 tax benefit (0% effective tax rate)
•₹16 lakh: ₹50,000 tax benefit (7.5% effective tax rate)
•₹18 lakh: ₹70,000 tax benefit (8.8% effective tax rate)
•₹20 lakh: ₹90,000 tax benefit (10% effective tax rate)
•₹25 lakh: ₹1,10,000 tax benefit (13.2% effective tax rate)
•₹50 lakh: ₹1,10,000 tax benefit (21.6% effective tax rate)
Overall, the government expects to forgo approximately ₹1 lakh crore in direct tax revenue due to these changes.
Importantly, these are rough estimates; for accurate tax savings, you can approach your financial planners.
