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New Income Tax slabs salary-wise calculation: Who will pay zero tax?
Nirmala Sitharaman said the income tax changes will cost the government more than 1 trillion rupees in revenue.
Finance minister Nirmala Sitharaman on Saturday announced income tax cuts in her eighth consecutive Budget speech, enhancing the middle class's prowess to increase spending and consumption.
Nirmala Sitharaman announced that those with salaries up to ₹12 lakh per year will not have to pay any income tax. Previously, the cap was ₹7 lakh per annum.
"I propose to revise tax rate structures as follows: 0 to ₹4 Lakhs - nil, ₹4 Lakhs to ₹8 Lakhs - 5%, ₹8 Lakhs to ₹12 Lakhs - 10%, ₹12 Lakhs to ₹16 Lakhs - 15%, ₹16 Lakhs to ₹20 Lakhs - 20%, ₹20 Lakhs to ₹24 Lakhs - 25% and above ₹24 Lakhs - 30%. To taxpayers up to ₹12 Lakhs of normal income other than special rate income such as capital gains, a tax rebate is being provided in addition to the benefit due to slab rate reduction in such a manner that there is no tax payable by them," she said.
Who will pay zero income tax?
In the budget document, the government also gave a detailed explanation as to who would pay nil taxes under the new tax regime.
Also read: Massive announcement by Nirmala Sitharaman, middle-class gets new income tax structure
According to the document, those with annual salaries of ₹8 lakh, ₹9 lakh, ₹10 lakh, ₹11 lakh and ₹12 lakh will not pay any taxes. Those with salaries of ₹16 lakh, ₹20 lakh, ₹24 lakh and ₹50 lakh will pay decreased amounts.
The minister also announced other tax measures and reforms, which “will substantially reduce the taxes of the middle class and leave more money in their hands boosting household consumption, savings and investment.”
The tax changes will cost the government more than 1 trillion rupees in revenue, the minister said.
"We will endeavour to keep the fiscal deficit each year such that the central government debt remains on a declining path as a percentage of the GDP,” she said.
What experts said on the income tax announcement
"The revamped tax slabs under the new tax regime as introduced by the Finance Bill 2025, aim to provide significant relief to taxpayers by extending the reduced personal income taxes up to INR 1.10 lakhs. Under the new regime, individuals with an income of up to INR 12.00 lakhs, excluding certain incomes such as capital gains subject to special tax rates, would be eligible for a full tax rebate under Section 87A, resulting in zero tax liability. This overhaul replaces the previous system and proposes to significantly reduce the tax burden, under which an individual paying INR 80,000 in taxes would now effectively pay nothing against a total income of INR 12.00 lakhs. Notably, the Finance Act 2023 had already established the new regime as the default framework," said Sohrab Bararia, Partner, Grant Thornton Bharat.
"For salaried individuals, the standard deduction was already increased to INR 75,000, effective July 2024. This enhancement, combined with the revised tax slabs, ensures that salaried individuals earning up to INR 12.75 lakh annually will have no tax liability. This would definitely help increase the disposable income and is expected to positively impact the consumption and savings patterns of Indian households," he added.
