Explained: No tax for Rs 12 lakh earnings! How your tax is calculated?
As per the new tax regime, individuals earning up to Rs 12 lakh in a year will not have to pay any taxes
Finance Minister Nirmala Sitharaman on Saturday announced significant income tax cuts for the middle class.
As per the new tax regime, individuals earning up to Rs 12 lakh in a year will not have to pay any taxes after she raised the exemption threshold from Rs 7 lakh.
An additional Rs 75,000 standard deduction is available for the salaried class.
She also altered tax slabs for people earning above this threshold to help save up to Rs 1.1 lakh in taxes for those with income up to Rs 25 lakh in a year.
The raising of the rebate leads to 1 crore people not having to pay any tax, she said. The overall tax slab regig will benefit 6.3 crore people, or more than 80 per cent of taxpayers.
But if there is no tax for Rs 12 lakh, why is there 5 percent tax on earnings between Rs 4 to 8 lakhs. How is tax calculated? How does it work? Let's try to understand!
The Finance Minister in her budget speech also announced a revised tax structure. The new slabs are as follows:
0-4 lakh rupees -- Nil
4-8 lakh rupees -- 5%
8-12 lakh rupees -- 10%
12-16 lakh rupees -- 15%
16-20 lakh rupees -- 20%
20-14 lakh rupees -- 25%
Above 24 lakh rupees -- 30%
