New Delhi: Union Finance Minister Nirmala Sitharaman’s Budget 2025 speech mentioned that if any individual has a total salary of Rs 1 lakh and income is Rs 12 lakh, then the taxpayer will have to pay Income Tax. FM Sitharaman announced to increase tax exemption or rebate under Section 87A. Now, Indian residents with net taxable income up to Rs 12 lakh will not have to pay any income tax.
If a salaried person has a gross taxable income of up to Rs 12.75 lakh, then after standard deduction of Rs 75,000, his net taxable income will be Rs 12 lakh, and he will also not have to pay any tax. At present, in the new tax regime, the provisions mention that there is no tax on income up to Rs 7 lakh, however, in Budget 2025, this limit has been increased to Rs 12 lakh.
What is Section 87A Tax Rebate?
Old Tax Regime: Existing provisions says that if the total income is less than Rs 5 lakh, then the entire tax will be waived off. The maximum tax exemption in this case is Rs 12,500.
New Tax Regime: In this system, the limit has now been increased to Rs 12 lakh. Now, the maximum tax exemption will be up to Rs 60,000.
What Explanatory Memorandum of Budget 2025 stated
From assessment year 2026-27:
The limit of total income has been increased, due to which full exemption will be available on income between Rs 7 lakh to Rs 12 lakh.
The maximum tax rebate limit has been increased from Rs 25,000 to Rs 60,000.
This rebate will be available only on regular income, i.e. special rate income (like capital gain u/s 111A, 112) will not get the benefit of this rebate.
According to the Budget 2025 announcement on Income Tax, people with income up to Rs 12 lakh will no longer have to pay any tax. For the salaried class, there will be no tax on gross income up to Rs 12.75 lakh, because standard deduction of Rs 75,000 is available. Tax will have to be paid on special income like capital gains, because the benefit of section 87A will not be available on it.
“There will be no income tax payable up to income of Rs 12 lakh (i.e. average income of Rs 1 lakh per month other than special rate income such as capital gains) under the new regime. This limit will be Rs 12.75 lakh for salaried tax payers, due to standard deduction of Rs 75,000,” the Finance Minister said.
New tax regime, the Finance Minister proposed to revise tax rate structure as follows:
| 0-4 lakh rupees | Nil |
| 4-8 lakh rupees | 5 per cent |
| 8-12 lakh rupees | 10 per cent |
| 12-16 lakh rupees | 15 per cent |
| 16-20 lakh rupees | 20 per cent |
| 20- 24 lakh rupees | 25 per cent |
| Above 24 lakh rupees | 30 per cent |
Under the new rule, people with income up to Rs 4 lakh will not have to file ITR. However it will now become necessary for people with income of Rs 4-12 lakh to file ITR, if they do not do so then they may have to pay a fine.
Budget 2025 significantly alters India’s income tax system. The new tax regime raises the income tax exemption limit to Rs 12 lakh, eliminating tax liability for individuals earning up to this amount. Salaried individuals can benefit from a higher threshold of Rs 12.75 lakh due to standard deductions. Section 87A tax rebate has also been increased, although this benefit doesn’t extend to special rate incomes like capital gains. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
