The Indian government has introduced significant changes to the income tax structure to benefit middle-class earners. Finance Minister Nirmala Sitharaman, in her recent budget announcement, increased the tax exemption limit and restructured the slabs, effectively reducing the tax burden on salaried individuals. These revisions aim to provide financial relief while ensuring fiscal balance.
One of the most notable changes is the exemption of income up to ₹12 lakh from taxation, along with an additional standard deduction of ₹75,000 for salaried employees. The revised slabs also enable individuals earning up to ₹25 lakh to save as much as ₹1.1 lakh in taxes. With these updates, around 1 crore taxpayers will be exempt from paying income tax, and over 6.3 crore individuals—more than 80% of taxpayers—will benefit from lower tax liabilities.
Income Tax Calculation for ₹14 Lakh Salary
If an individual earns ₹14 lakh annually, the tax calculation under the new regime is as follows:
- First ₹4 Lakh – Completely tax-free.
- Next ₹4 Lakh (₹4-8 Lakh slab) – Taxed at 5%
- 5% of ₹4 lakh = ₹20,000
- Next ₹4 Lakh (₹8-12 Lakh slab) – Taxed at 10%
- 10% of ₹4 lakh = ₹40,000
- Remaining ₹2 Lakh (₹12-14 Lakh slab) – Taxed at 15%
- 15% of ₹2 lakh = ₹30,000
Total Tax Liability:
- ₹20,000 (₹4-8 lakh slab)
- ₹40,000 (₹8-12 lakh slab)
- ₹30,000 (₹12-14 lakh slab)
- Total Tax = ₹90,000
Thus, for an annual income of ₹14 lakh, the total tax payable under the new regime would be ₹90,000.
Understanding the ₹12 Lakh Tax Exemption
Under the new system, an individual earning ₹12 lakh per year is entitled to a full tax rebate, meaning they will pay zero tax. Here’s how the tax liability is calculated:
- First ₹4 Lakh – No tax.
- Next ₹4 Lakh – Taxed at 5% → ₹20,000
- Next ₹4 Lakh – Taxed at 10% → ₹40,000
- Total Tax before rebate = ₹60,000
However, the government provides a rebate of ₹60,000, effectively reducing the tax liability to zero.
These reforms significantly lower the tax burden on middle-income earners, allowing them to save more. With higher exemptions and rebates, individuals can now benefit from a simplified tax structure while enjoying increased financial flexibility.
