New Tax Regime (NTR)
Income up to ₹12,00,000 is tax-free under the NTR.
With a ₹75,000 standard deduction, this limit increases to ₹12,75,000 for salaried individuals.
Tax slabs are adjusted with ₹4 lakh intervals between each slab: ₹0-4 lakh (Nil), ₹4-8 lakh (5%), ₹8-12 lakh (10%), ₹12-16 lakh (15%), ₹16-20 lakh (20%), ₹20-24 lakh (25%), and above ₹24 lakh (30%).
If income is ₹12.10 lakh, tax will be ₹61,500 (₹60,000 + ₹1,500 for the excess ₹10,000 at 15%).
New Tax Rate Category
Introduced a fresh 25% tax rate category, not available in the previous year.
Previously, the tax jumped directly from 20% to 30%, but now there’s a smoother progression.
This change helps distribute the tax burden more evenly across different income levels.
Two Components
Standard Deduction: ₹75,000 reduces taxable income directly, lowering the total tax payable.
Rebate (Section 87A): Offers a ₹60,000 rebate if taxable income is within ₹12,00,000, effectively making the tax zero.
Rebate acts like a discount, not a deduction, and applies only if the income meets specific criteria.
For incomes exceeding ₹12,00,000, rebate is not available, resulting in higher taxes.
Example: If taxable income is ₹12,10,000, rebate isn’t applicable, and the tax is ₹61,500.
Exceeding Limit
If income exceeds ₹12.75 lakh, both rebate and marginal relief are not applicable, leading to higher tax liability.
Marginal Relief: Applies if income is above ₹12,00,000 but below ₹12,75,000, reducing tax by deducting the excess income from the total tax.
Contributions to the National Pension Scheme (NPS) under Section 80CCD(2) can reduce taxable income, especially when income exceeds ₹12.75 lakh.
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