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Budget Explainer: What changes have happened in the tax system, is the new regime good or old; know the answers to all the questions..

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Finance Minister Nirmala Sitharaman presented her eighth consecutive budget on February 1, 2025. In this, an attempt was made to give full relief to the middle class. Its purpose is to increase the savings of the common man so that the pace of the sluggish economy can be increased by increasing consumption. The Finance Minister has also announced a revised tax slab in the budget, which has increased confusion among the people. Let us also understand the tax slab and whether the new tax regime will be good or the old one.

What are the new tax slabs?

Finance Minister Nirmala Sitharaman has changed the tax slab under the New Tax Regime in Budget 2025. Now a person earning a salary will not have to pay any tax on annual income up to Rs 4 lakh. At the same time, those with income from Rs 4 lakh to Rs 8 lakh will have to pay a 5 percent tax. This rate will be 10 percent on Rs 8 lakh to Rs 12 lakh. The tax rate on income of Rs 12 lakh to Rs 16 lakh, Rs 16 lakh to Rs 20 lakh, and Rs 20 lakh to Rs 24 lakh is 15 percent, 20 percent, and 25 percent respectively.

What changes have happened in the slab?

Earlier in the new tax regime, there was zero tax on annual income up to Rs 3 lakh. Now the government has increased this limit to Rs 4 lakh. At the same time, the 5 percent tax slab is now Rs 4 to 8 lakh. It was earlier Rs 3 to 7 lakh. At the same time, there was a 10 percent tax on the tax slab of Rs 7 to 10 lakh. It has now been revised to Rs 8 to 12 lakh. There was earlier a 15 percent tax on the slab of Rs 12 to 15 lakh. It has been changed to Rs 12 to 16 lakh.

The 30 percent tax slab on income above Rs 15 lakh has now been divided into parts. Now 20% tax will be levied on the bracket of Rs 16 to 20 lakh, 25% on Rs 20 to 24 lakh, and 30% on income above Rs 24 lakh.

How much tax will be levied on income of Rs 16 lakh?

If we take the example of an annual income of Rs 16 lakh, then there will be no tax up to Rs 4 lakh. Then 5% tax will be levied in the slab of Rs 4 lakh to Rs 8 lakh. This will be Rs 20,000. At the same time, a 10% tax will be levied in the slab of Rs 8 lakh to 12 lakh, which will be Rs 40,000. And in the slab of Rs 12 lakh to Rs 16 lakh, this rate is 15%, i.e. Rs 60,000. In such a situation, you will have to pay a total tax of Rs 1,20,000. This is Rs 50,000 less than the tax you are currently paying.

What if the salary is Rs 50 lakh?

Now those with higher salaries will get a benefit of more than Rs 1 lakh according to the new slab. For example, a person earning Rs 50 lakh per annum will now pay an income tax of Rs 10,80,000 as per the revised slab, which is Rs 1,10,000 less than the tax he currently pays. This effectively means that the new slabs are aimed at putting more money in the hands of the middle-income group, so that consumption is boosted and high-salary individuals get some relief.

What happened in the old tax regime?

It is clear in the budget document that the revised slabs are for those who are choosing the new tax regime. Actually, the government wants to simplify the tax system by changing it. This will enable more people to join the tax system. Right now many people run away from it due to complexities related to tax. Finance Minister Nirmala Sitharaman did not mention the old tax regime in the budget speech. This means that there is no change in the old tax system.

Is the new tax regime better than the old one?

The answer to this question depends entirely on your financial health and the tax deduction benefits you are getting from your investments. For example, if your income is Rs 16 lakh and you show a deduction of Rs 4 lakh, then your taxable income will be Rs 12 lakh. In such a case, according to the old tax regime, you will have to pay a total income tax of Rs 1,77,500. This is Rs 57,000 more than the new tax regime.

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