New Tax Regime Slabs: Is your annual salary Rs 12,87,500? Do you need to pay tax on Rs 12,500 or Rs 12,87,500? See calculations to know
Revised New Tax Regime Slabs: The Income Tax Bill 2025 says that the proposed tax regime slabs will come into effect from April 1, 2025. In the proposed new tax regime slabs, a salaried-class individual doesn't need to pay any tax if their income is Rs 12,75,000. But what if they are earning Rs 12,500 more than it? What will be their tax liability? Do they have to pay tax on Rs 12,500 or Rs 12,87,500?
Revised New Tax Regime Slabs: Income Tax Bill 2025 tabled in Parliament today (February 13, 2025) made it clear that the proposed income tax regime slabs would come into effect from April 1, 2025. It means that non-salaried individuals with an annual income up to Rs 12 lakh and salaried individuals with an annual salary up to Rs 12,75,000 won't have to pay any tax. But what if your salary is slightly above that? How much tax do you need to pay? What if your salary is Rs 12,87,500? Will you have to pay tax on Rs 12,500 or 12,87,500? See calculations to know-
Photos: Unsplash/Pixabay/Pexels
Tax slabs in proposed new tax regime
| Income Tax Slabs | Tax Rate |
| Upto Rs. 4,00,000 | NIL |
| Rs. 4,00,001 - Rs. 8,00,000 | 5% |
| Rs. 8,00,001 - Rs. 12,00,000 | 10% |
| Rs. 12,00,001 - Rs. 16,00,000 | 15% |
| Rs. 16,00,001 - Rs. 20,00,000 | 20% |
| Rs. 20,00,001 - Rs. 24,00,000 | 25% |
| Above Rs. 24,00,000 | 30% |
Tax slabs is existing new tax regime
| Tax Slab for FY 2024-25 | Tax Rate |
| Up to Rs 3 lakh | NIL |
| Rs 3 lakh - Rs 7 lakh | 5% |
| Rs 7 lakh - Rs 10 lakh | 10% |
| Rs 10 lakh - Rs 12 lakh | 15% |
| Rs 12 lakh - Rs 15 lakh | 20% |
| Above Rs 15 lakh | 30% |
What are main tax slab changes?
As in the chart, you can see the slabs have changed. A 25 per cent slab has been introduced, while the 30 per cent slab starts from Rs 24 lakh.
Tax-free income
For non-salaried individuals, it is Rs 12,00,000. For non-salaried individuals, it is Rs 12,75,000.
Why salaried individuals are getting extra benefit of Rs 75,000?
They will get a standard deduction of Rs 75,000, which non-salaried individuals won't get.
Why is there no tax till Rs 12 lakh income?
As per the proposed new tax regime slabs, the total tax on an income of Rs 12 lakh is Rs 60,000. But taxpayers will get a rebate of up to Rs 60,000. After getting the rebate's benefit, the tax liability will be 0.
Tax liability if they cross the limit?
Here, comes the catch. Take the example of a non-salaried class taxpayer. What if their income is Re 1 extra than Rs 12 lakh? Do they have to pay tax on Re 1 or Rs 12 lakh.
What if for a salaried class, the total income is Rs 1,000 extra than the tax-free limit of Rs 12,75,000. Do they have to pay tax on Rs 12,76,000 or Rs 1,000?
What's the solution?
To know it, one needs to know the concept of marginal relief. Under Section 87A of the Income Tax Act, 1961, taxpayers can get the benefit of marginal relief, where if their income is slightly above the tax-free limit, they don't have to pay more tax than their incremental income. If the extra income is more than the tax liability, the taxpayer needs to pay income tax as per the slab.
Example
E.g., if a non-salaried taxpayer earns Rs 12,25,000, as per tax slabs, their income tax liability is Rs 63,750 (excluding 4 per cent cess). But since their extra income (Rs 25,000) is less than the tax liability (Rs 63,750), they need to pay tax equal to the extra income (in this case, Rs 25,000).
What will be income tax on Rs 12,10,000 income (non-salaried class)?
In this case, the tax liability will be Rs 61,500. But since extra income is just Rs 10,000, which is smaller than the tax liability, the taxpayer needs to pay just Rs 10,000 in tax.
What will be income tax on Rs 12,75,000 income (non-salaried class)?
In this case, the tax liability will be Rs 71,250. But since extra income is just Rs 75,000, which is smaller than the tax liability, the taxpayer needs to pay Rs 71,250 in tax.
What will be income tax on Rs 12,87,500 income (for salaried class)?
A salaried class taxpayer will get a Rs 75,000 standard deduction on it. So, their taxable income will be Rs 12,12,500. The tax liability in this case is Rs 62,500. But they need to pay Rs 12,250 in tax as the amount is smaller than the tax liability of Rs 62,500.
What will be income tax on Rs 13,50,000 income (for salaried class)?
The extra income than the tax-free limit is Rs 75,000. While the tax liability on this salary is Rs 74,100. So, the total tax on the salary will be Rs 74,100.