Tax Breaks Galore: No Tax on Income Up to Rs. 7.75 Lakhs in the New System

In India, if your income is above a certain amount, you have to pay tax. There are two tax systems: the old system and the new system. The old system hasn't changed much recently, and there are talks of replacing it. The new system, however, has had changes in each budget.

In the 2024 budget, the standard deduction for the new tax system was raised from Rs. 50,000 to Rs. 75,000. The old system did not change. The new tax brackets were also simplified to help the middle class, especially people earning between Rs. 6-7 lakhs and Rs. 9-10 lakhs.

Here are the key changes:

1. The minimum tax exemption limit is now Rs. 3 lakhs.

2. The tax rate on income from Rs. 3-7 lakhs is now 5%.

3. Income between Rs. 7-10 lakhs will be taxed at 10%.

4. Income between Rs. 10-12 lakhs will be taxed at 15%.

5. Income between Rs. 12-15 lakhs will be taxed at 20%.

6. Income above Rs. 15 lakhs will be taxed at 30%.

With these changes, there is no tax on income up to Rs. 7.75 lakhs in the new system. For example, if your income is Rs. 7 lakh:

• The first Rs. 3 lakh is tax-free.
• The remaining Rs. 4 lakh is taxed at 5%, which equals Rs. 20,000.
• However, because of a Rs. 25,000 tax rebate, no tax is due on a Rs. 7 lakh income.

We will have to wait for the 2025 budget to see if more changes are made.