Revised Tax Slabs: Annual Income Rs 12,75,001? Will you be taxed on Re 1 or Rs 12,75,001? Know what CAs say

Revised Income Tax Slabs: One of the major announcements in Budget 2025 was that non-salaried individuals up to an annual income of Rs 12 lakh and salaried individuals up to an income of Rs 12,75,000 won't be taxed. But what if you are a non-salaried individual with Rs 12,00,001 income or a salaried individual with Rs 12,75,001 income? Will you be taxed on just Rs 1 or the entire amount? Know what expert speaks-??

Shaghil Bilali | Feb 03, 2025, 06:47 PM IST

New Tax Regime Revised Slabs, Budget 2025: Crores of taxpayers across India got a major relief when Finance Minister Nirmala Sitharaman revised new tax regime slabs, announcing that non-salaried individuals up to an annual income of Rs 12 lakh and salaried individuals up to an annual income of Rs 12.75 lakh won't be taxed. For salaried individuals, an extra Rs 75,000 relaxation is because of the standard deduction, which non-salaried individuals don't get. But what if a non-salaried person earns Rs 12,00,001 or a salaried person earns Rs 12,75,001 a year? Do they have to pay tax on the entire income or just Rs 1? See expert views to know how much tax you need to pay on that-??
Photos: Unsplash/Pixabay/Pexels

1/13

What are revised new tax regime slabs?

What are revised new tax regime slabs?

Income Tax Slabs Tax Rate
Upto Rs. 4,00,000 NIL
Rs. 4,00,001 - Rs. 8,00,000 5%
Rs. 8,00,001 - Rs. 12,00,000 10%
Rs. 12,00,001 - Rs. 16,00,000  15%
Rs. 16,00,001 - Rs. 20,00,000 20%
Rs. 20,00,001 - Rs. 24,00,000 25%
Above Rs. 24,00,000  30%

2/13

What are existing new tax regime slabs?

What are existing new tax regime slabs?

Tax Slab for FY 2024-25 Tax Rate
Up to Rs 3 lakh NIL
Rs 3 lakh - Rs 7 lakh 5%
Rs 7 lakh - Rs 10 lakh 10%
Rs 10 lakh - Rs 12 lakh 15%
Rs 12 lakh - Rs 15 lakh 20%
Above Rs 15 lakh 30%

3/13

When will revised new tax regime slabs be applicable?

When will revised new tax regime slabs be applicable?

The slabs will be applicable from next year. It means individuals who will file their return for FY25-26 can file their ITR under revised slabs. For this year, they can file their ITR only under the existing new and old regime tax slabs.

4/13

What is major difference?

What is major difference?

After a standard deduction, an income of up to Rs 7 lakh is tax-free in the existing new tax regime.

 

5/13

What is major difference?

What is major difference?

In the revised tax regime, an income up to Rs 12 lakh is tax-free for the non-salaried class, while an income up to Rs 12,75,000 is tax-free for salaried individuals.

6/13

Why salaried individuals are getting extra Rs 75,000 benefit?

Why salaried individuals are getting extra Rs 75,000 benefit?

Salaried individuals get a standard deduction of Rs 75,000, which non-salaried individuals don't get.

7/13

What is standard deduction?

What is standard deduction?

It is an amount deducted from the taxable salary income, allowing taxpayers to reduce their taxable income without submitting any proof. 

Finance Minister Nirmala Sitharaman increased this limit from Rs 50,000 to Rs 75,000 for new tax regime taxpayers in the 2024 budget. 

8/13

Tax if non-salaried individual earns Rs 12,00,001 & salaried individual earns Rs 12,75,001

Tax if non-salaried individual earns Rs 12,00,001 & salaried individual earns Rs 12,75,001

In such a condition, both have crossed the tax-free income limit. But the question that can confuse most people is, will they be taxed on Rs 1 or the entire amount?

We spoke to Abhishek Mundada, Partner, Dhruva Advisors, to know that. Let's read how he elaborated. 

9/13

Tax on entire income or Rs 1 for non-salaried individual?

Tax on entire income or Rs 1 for non-salaried individual?

Mundada says, "If there is an income exceeding Rs 12 lakh, then there is a marginal relief, which the government provides to a taxpayer. 

10/13

How does marginal relief work?

How does marginal relief work?

He says for any income "which is above Rs 12 lakh, you compute the tax as per tax slab rates. But if that tax is less than the incremental income above Rs 12 lakh, you pay tax only for the incremental income and not the entire tax." 

11/13

How does marginal relief work?

How does marginal relief work?

He further says, "It means if the annual income is Rs 12,00,001, you compute the tax as per slab rates, which is Rs 60,000. Compare that with Rs 1, which is the income above Rs 12 lakhs. So whichever is less, you pay tax only on that amount, which is Rs 1 in this case.

 

12/13

More examples of marginal relief

More examples of marginal relief

Mundada says that marginal relief is a relief that is granted to ensure that the tax payable is only about Rs 12 lakh. However, if the income level exceeds beyond, the difference between tax as per slab rates and incremental income above Rs 12 lakh, then marginal relief is not applicable. 

13/13

When will it apply?

When will it apply?

Mundada continues, "So, if one goes by the working, up to Rs 12,70,000, the marginal relief concept will work, and hence income will not be taxable. But the moment it is Rs 12,75,000, the difference between tax as per slab rates and the extra income is Rs 75,000. It is exceeding tax rates, which is calculated, and hence marginal relief won't be applicable. In this situation, the entire tax as per slab rates would be required to be paid."

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