In the Union Budget presented on February 1, 2025, the Indian government introduced significant changes to the income tax structure under the new tax regime, aiming to provide relief to middle-class taxpayers and stimulate economic growth.
Revised Income Tax Slabs for FY 2025-26:
- Up to ₹3,00,000: No tax
- ₹3,00,001 to ₹7,00,000: 5%
- ₹7,00,001 to ₹10,00,000: 10%
- ₹10,00,001 to ₹12,00,000: 15%
- ₹12,00,001 to ₹15,00,000: 20%
- Above ₹15,00,000: 30%
Additionally, the standard deduction for salaried individuals has been increased to ₹75,000.
Tax Calculation for an Annual Income of ₹12,75,000:
- Gross Income: ₹12,75,000
- Less: Standard Deduction: ₹75,000
- Net Taxable Income: ₹12,00,000
Tax Liability Computation:
- Up to ₹3,00,000: No tax
- ₹3,00,001 to ₹7,00,000: 5% of ₹4,00,000 = ₹20,000
- ₹7,00,001 to ₹10,00,000: 10% of ₹3,00,000 = ₹30,000
- ₹10,00,001 to ₹12,00,000: 15% of ₹2,00,000 = ₹30,000
Total Tax Before Rebate: ₹20,000 + ₹30,000 + ₹30,000 = ₹80,000
Under Section 87A, a rebate is available for individuals with a net taxable income up to ₹12,00,000, effectively reducing their tax liability to zero.
Final Tax Payable: ₹80,000 – ₹80,000 (rebate) = ₹0
Therefore, with the application of the standard deduction and the Section 87A rebate, an individual with a gross annual income of ₹12,75,000 will have no tax liability under the new tax regime for FY 2025-26.
