Zero Income Tax on Salaries up to INR 13.05 Lakh, Not Just INR 12 Lakh; Here’s Why

Mumbai, February 2: Finance Minister Nirmala Sitharaman has provided major tax relief to the salaried class in the Union Budget 2025. While the income tax exemption limit is set at INR 12 lakh, additional benefits push the tax-free threshold even higher. With standard deduction and marginal relief, salaries up to INR 13.05 lakh will now attract zero tax. But how does this new calculation work, and who benefits the most?

As per a Money Control report, the key factor behind this extended tax relief is the concept of marginal relief. This ensures that individuals earning slightly above the exemption limit don’t face a sudden tax burden. With a standard deduction and marginal relief, taxpayers can now save significantly. This move is expected to increase disposable income, encouraging both savings and spending. The government’s decision aims to ease financial burdens on the middle class. Let’s understand how this works and how much tax has been reduced across different income slabs. How New Income Tax Slabs and Rates, Announced in Budget 2025, Are Different From Current Income Tax Slabs and Rates Under Old and New Regimes.

Here’s How the Calculation Works

The revised tax calculations consider both standard deduction and marginal relief to prevent taxpayers from facing a sudden tax jump. For salaries up to INR 12.75 lakh, a standard deduction of  INR 75,000 applies, ensuring no tax liability. If income slightly exceeds INR 12.75 lakh, marginal relief of INR 30,000 kicks in. This means someone earning INR 13.05 lakh, who would otherwise pay INR 30,000 in tax, now pays nothing. The relief ensures smooth tax progression without sudden jumps. Income Tax Slabs 2025: Nil Tax for Individuals Earning up to INR 12 Lakh Annually Under New Regime, Says FM Nirmala Sitharaman.

For those earning beyond INR 13.05 lakh, tax applies only to the excess amount. For example, an individual with an INR 14 lakh salary will be taxed only on the INR 95,000 exceeding INR 13.05 lakh. This restructuring benefits taxpayers across income brackets. Someone earning INR 18 lakh will now pay INR 1.60 lakh instead of INR 2.30 lakh, saving INR 70,000. Even high-income earners benefit, with a tax on INR 24 lakh dropping from INR 4.10 lakh to INR 3 lakh, an INR 1.10 lakh reduction.

These revised tax calculations ensure a smoother transition for taxpayers, eliminating sudden tax spikes and offering substantial relief across various income brackets. With the inclusion of marginal relief, individuals, regardless of income, can expect a more equitable and predictable tax burden.

(The above story first appeared on Today News 24 on Feb 02, 2025 11:45 AM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website todaynews24.top).