BUDGET
How the tweak in income tax rates benefits different income groups
This story was originally published at 15:49 IST on 1 February 2025
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NEW DELHI – Finance Minister Nirmala Sitharaman Saturday announced a major income tax bonanza to give an impetus to household consumption, especially among the middle class. She announced that there will be no tax on personal income of up to INR 1.2 million, a move aimed at reducing the tax burden and increasing disposable incomes. Since standard deduction under the new tax regime was retained at INR 75,000, the exemption translates to tax-free annual income of INR 1.275 million.
Sitharaman also tweaked the income tax structure to aid savings and investments of individuals across all income strata. The revised tax slabs will lead to the government forgoing revenue to the tune of INR 1 trillion per annum.
In her speech, the finance minister explained that the benefit of tax exemption for income up to INR 1.2 million will be given through tax rebates. "A taxpayer in the new regime with an income of INR 1.2 million will get a benefit of INR 80,000 in tax, which is 100% of tax payable as per existing rates. A person having income of INR 1.8 million will get a benefit of INR 70,000 in tax, which is 30% of tax payable as per existing rates," she said.
Below is the change in tax structure and how that affects incomes at various levels:
| Total Income |
Tax as per existing rates [as per Finance (No.2) Act, 2024] |
Tax as per proposed rates | Benefit of Rate/Slab |
Rebate Benefit [with reference to (3)] |
Total Benefit [computed when compared to current slab rates] |
|
| (1) | (2) | (3) | (4)=(3)-(2) | (5) | (6)=(4)+(5) | |
| 800,000 | 30,000 | 20,000 | 10,000 | 20,000 | 30,000 | |
| 900,000 | 40,000 | 30,000 | 10,000 | 30,000 | 40,000 | |
| l mln | 50,000 | 40,000 | 10,000 | 40,000 | 50,000 | |
| 1.1 mln | 65,000 | 50,000 | 15,000 | 50,000 | 65,000 | |
| 1.2 mln | 80,000 | 60,000 | 20,000 | 60,000 | 80,000 | |
| 1.3 mln | 100,000 | 75,000 | 25,000 | 0 | 25,000 | |
| 1.4 1ac | 120,000 | 90,000 | 30,000 | 0 | 30,000 | |
| 1.5 mln | 140,000 | 105,000 | 35,000 | 0 | 35,000 | |
| 1.6 mln | 170,000 | 120,000 | 50,000 | 0 | 50,000 | |
| 1.7 mln | 200,000 | 140,000 | 60,000 | 0 | 60,000 | |
| 1.8 mln | 230,000 | 160,000 | 70,000 | 0 | 70,000 | |
| 1.9 1ac | 260,000 | 180,000 | 80,000 | 0 | 80,000 | |
| 2.0 mln | 290,000 | 200,000 | 90,000 | 0 | 90,000 | |
| 2.1 mln | 320,000 | 225,000 | 95,000 | 0 | 95,000 | |
| 2.2 mln | 350,000 | 250,000 | 100,000 | 0 | 100,000 | |
| 2.3 mln | 380,000 | 275,000 | 105,000 | 0 | 105,000 | |
| 2.4 mln | 410,000 | 300,000 | 110,000 | 0 | 110,000 | |
| 2.5 mln | 440,000 | 330,000 | 110,000 | 0 | 110,000 | |
End
Reported by Priyasmita Dutta
Edited by Rajeev Pai
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