Budget 2025: How the New Tax Regime Benefits Salaried Employees- Here's an Overview

Finance Minister Nirmala Sitharaman announced a significant relief for the middle class in the Union Budget 2024 by increasing the tax exemption limit under the new tax regime. As per the latest revision, there will be zero income tax for individuals earning up to Rs 12 lakh annually. For salaried employees, this limit extends to Rs 12.75 lakh per annum after considering a standard deduction of Rs 75,000.

Confusion Over Tax Slabs Explained

Following the budget speech, DMK MP Dayanidhi Maran raised concerns about a possible contradiction in the minister’s announcement. While she initially stated that no income tax would be levied on earnings up to Rs 12 lakh, the updated tax slabs indicate a 10% tax rate for incomes between Rs 8 lakh and Rs 12 lakh.

To clarify, the new tax regime provides a structured approach where individuals earning more than Rs 12 lakh will be taxed in slabs starting from Rs 4 lakh onwards. The rebate relief is applicable only for income up to Rs 12 lakh, while any earnings beyond this threshold will be taxed progressively.

Revised Tax Slabs under the New Regime

The updated income tax slabs for individuals earning above Rs 12 lakh are:

Up to Rs 4 lakh – No tax (0%) Rs 4 lakh to Rs 8 lakh – 5% Rs 8 lakh to Rs 12 lakh – 10% Rs 12 lakh to Rs 16 lakh – 15% Rs 16 lakh to Rs 20 lakh – 20% Rs 20 lakh to Rs 24 lakh – 25% Above Rs 24 lakh – 30%

How Tax is Calculated Post-Revision

For instance, if an individual earns Rs 13 lakh annually under the new tax regime, the calculation will be as follows:

Total Income: Rs 13,00,000 Standard Deduction: Rs 75,000 Taxable Income: Rs 12,25,000

Tax Breakdown:

Up to Rs 4 lakh – No tax Rs 4 lakh to Rs 8 lakh – 5% on Rs 4 lakh = Rs 20,000 Rs 8 lakh to Rs 12 lakh – 10% on Rs 4 lakh = Rs 40,000 Rs 12 lakh to Rs 12.25 lakh – 15% on Rs 25,000 = Rs 3,750

Thus, the total tax payable before cess will be Rs 63,750. Additionally, a 4% health and education cess applies.

Key Benefits for Taxpayers

After this revision, taxpayers under the new regime will enjoy significant tax savings:

Individuals earning Rs 12 lakh annually – Tax savings of Rs 80,000 Individuals earning Rs 18 lakh annually – Tax savings of Rs 70,000 Individuals earning Rs 25 lakh annually – Tax savings of Rs 1.10 lakh

The updated tax structure is designed to provide relief to the middle class while ensuring a fair tax distribution for higher earners. Stay tuned for further updates on tax policies and financial planning strategies following Budget 2024.