Meanwhile, 75% of taxpayers have already moved to new tax regime, which has now been restructured to offer low slab rates.
However, many taxpayers are confused about how much tax they will actually pay under the new tax government announced in the budget 2025, especially if their income crosses ₹ 12 lakhs per year.
Let’s break it.
Understand new tax slab
The government has introduced a new slab system, where the tax is completely exempted for income of up to ₹ 12 lakhs.
However, the moment a person’s taxable income crosses this limit, they have to pay tax on their complete taxable income according to the following rates: (note: For salaried persons, this limit of factoring in standard cuts Later ₹ 12.75 lakhs increases. ₹ 75,000.)
This is a significant change from the previous tax regime, where any income above ₹ 15 lakh was taxed at a rate of 30%.
Amending the brackets bring great savings for those earning between ₹ 12 lakh and ₹ 24 lakhs.
How much tax will you pay? A breakdown based on separate salary
To better understand the effects of these changes, let’s see how much tax you will pay at various income levels.
If your taxable income is ₹ 13 lakh
Since your income is more than ₹ 12 lakhs, the discount does not apply. Here is how your tax is calculated:
15% ₹ 12-13 Lakh → at ₹ 15,000
So your total tax liability is ₹ 75,000 which was earlier ₹ 1 lakh – so you save ₹ 25,000 in taxes.
If your taxable income is ₹ 15 lakhs
15% ₹ 12-15 Lakh → at ₹ 45,000
Your total tax liability: ₹ 1,05,000
Earlier, it was ₹ 1.40 lakh – so you. 35,000 saves.
If your taxable income is ₹ 20 lakhs
₹ 16-20 Lakh 20% → ₹ 80,000
Your total tax liability: ₹ 2,00,000
Earlier, it was ₹ 2.90 lakh – so you. 90,000 saves.
If your taxable income is ₹ 25 lakh
₹ 24-25 Lakh 30% → ₹ 30,000
Your total tax liability: ₹ 3,30,000
Earlier, it was ₹ 4.40 lakh – so you save ₹ 1.10 lakh.
Does the old rule still understand?
For years, taxpayers preferred old tax regime due to cuts:
- Section 80C () 1.5 lakh)
- HRA (Home Fare Allowance)
- Home loan interest deduction
- NPS contribution
But with rapid low tax rates, even with cuts, the new regime is more beneficial for most taxpayers. This budget sends a clear message: the new tax regime is the future, and for most taxpayers, it now makes more understandable than the old system.
Also read In these cases, salary tax of up to ₹ 12 lakh will not be free under the new regime.
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