To give a boost to economic activities and relieve the taxpayers further, the exemption limit is raised from ₹7 lakh to ₹12 lakh by the Indian government. While presenting the budget, Finance Minister Nirmala Sitharaman stressed that it was not only a question of reducing tax slabs; we would also give an extra rebate applying to a few taxpayers.
We are taking two steps: reductions in slab rates and extra rebates. We felt that some should get more audience than merely slab rate reductions. So, an extra rebate was put in. Slab rate reductions apply to all, and the extra rebate for some. Hopefully, the money thus spared by taxpayers will find its way back into the economy by way of consumption, savings, or investment.”
Taxpayers of different income brackets will benefit from the revised tax slabs, while some sections will additionally receive a further rebate that will further reduce their tax burden.
New Tax Slabs and Reductions
Light of the latest tax regime, the revised tax slabs are:
Income below ₹3 lakh – Nil
From ₹3 lakh to ₹6 lakh – 5%
Income above ₹6 lakh and below ₹9 lakh – 10%
Income above ₹9 lakh and below ₹12 lakh – 15%
Income above ₹12 lakh and below ₹15 lakh – 20%
Income above ₹15 lakh – 30%
For example, this means that if a person is earning ₹9 lakh per annum, he will have to pay only ₹45,000 taxes instead of ₹60,000 applicable at the same income level under the old regime. Also, for an income of ₹15 lakh, a person would pay taxes of approximately ₹1.5 lakh, down from ₹1.87 lakh under the previous regimes-a change of almost 20%.
The extra rebate is meant to further provide relief over what the slab reductions provide. Whereas specific eligibility conditions will be clarified in good time, the objective is to make certain that some strata—potentially low- and middle-income taxpayers—gain more.
Watch for the fact that this rebate alongside the slab cuts increases disposable incomes which could now drive up the levels of spending and summon greater domestic demand than would have been the case otherwise. This soundly reflects the expectations of the government that this will stimulate economic growth, specifically in real estate, automobiles, and consumer goods.
Standard Deduction and Assault
The exemption of a standard deduction of ₹50,000 to the new tax regime so that more help can be showered on salaried employees and pensioners has been assigned. Also, the highest surcharge rate has now been reduced from 37% to 25% for incomes over ₹2 crore. This brings down the highest tax rate that is currently levied from 42.74% down to 39%.This was further supported by the following remarks from the finance minister-
The reactions to the budget announcement range from moderately positive for consumer-linked sectors like FMCG and automobiles to more cautious in reaction to mostly infrastructure-related sectors. Experts believe this is a policy that fuels consumption in the short term and investments in the long term, aligning with the government’s overall growth strategy.
The decision to increase income tax exemption and introduce an extra rebate marks a remarkable step toward the reduction of tax revenue foregone of the citizens of India. With disposable incomes on the rise, taxpayers are expected to play a larger role in economic growth through higher spending and investments in the economy. The new tax structure reflects the vision of the government to balance prudent fiscal policy with the reform that induces growth.
