Income Tax: How Will Income Over Rebate Limit Of Rs 12.75 Lakh Be Taxed?

The new income tax laws came into effect on April 1, offering new tax rates and enhanced rebate benefits under the revised income tax regime.These changes, announced by Finance Minister Nirmala Sitharaman in the Union Budget, aim to boost disposable income and ease the impact of inflation.Under the revised income tax rates of the new regime, the full tax rebate benefit has been increased up to an income of Rs 12 lakh.

This means that an income of up to Rs 12,00,000 will not attract any taxes under the new tax regime. For the salaried class, this limit extends up to Rs 12.75 lakh with an additional Rs 75,000 standard deduction provision to reduce tax liability.



However, the new taxation laws say that any income above Rs 12 lakh (Rs 12.75 lakh for salaried individuals), will attract tax on the entire income. To be clear, the new tax regime has a basic exemption limit of Rs 4 lakh.

This means that the tax starts applying after the first Rs 4,00,000 income. New Tax Slabs Under New Regime:Rs 0-4 lakh: Nil (No tax)Rs 4-8 lakh: 5% taxRs 8-12 lakh: 10% taxRs 12-16 lakh: 15% taxRs 16-20 lakh: 20% taxRs 20-24 lakhs: 25% taxAbove Rs 24 lakh: 30% taxFor instance, an income of Rs 12 lakh used to attract a tax of Rs 80,000 so far. However, the revised slabs will reduce this liability to Rs 60,000.

This means a benefit of Rs 20,000 under the revised rates. Moreover, since an income of Rs 12 lakh comes with full rebate benefits, taxpayers will not be required to pay the Rs 60,000 tax liability within the new structure. Hence, their net tax amounts to zero.

How Will Tax Be Calculated For Rs 12.76 lakh?In the case of salaried class taxpayers, a standard deduction of Rs 75,000 would help them nullify their tax liability up to the income of Rs 12.75 lakh.

However, if someone has a salary of Rs 12.76 lakh, they will need to pay tax on their entire income, after considering the standard deduction of Rs 75,000.This means an income of Rs 12.

76 lakh has a net taxable income of Rs 12.01 lakh.Tax on an income of Rs 12.

01 lakh based on the given tax slabs:Rs 0-4 lakh: No taxRs 4-8 lakh: 5% of Rs 4 lakh = Rs 20,000Rs 8-12 lakh: 10% of Rs 4 lakh = Rs 40,000Rs 12-12.01 lakh: Rs 1,000 taxed at 15% = Rs 150Total tax = Rs 20,000 + Rs 40,000 + Rs 150 = Rs 60,150So, the tax on an income of Rs 12.01 lakh is Rs 60,150.

Hence, a difference of Rs 1,000 in salary for the salaried class can cost them up to Rs 60,000 in taxes. Similarly, other salaried class individuals can calculate their taxes for an income above Rs 12.75 lakh after accounting for Rs 75,000 standard deduction.

For instance, tax on Rs 13 lakh income for salaried class:Total taxable income after deduction:Rs 13,00,000 - Rs 75,000 = Rs 12,25,000Total tax based on new regime rates:Rs 0-4 lakh: No taxRs 4-8 lakh: 5% of Rs 4 lakh = Rs 20,000Rs 8-12 lakh: 10% of Rs 4 lakh = Rs 40,000Rs 12-12.25 lakh: Rs 0.25 lakh taxed at 15% = Rs 3,750Total tax = Rs 20,000 + Rs 40,000 + Rs 3,750 = Rs 63,750So, the tax on Rs 13 lakh after the Rs 75,000 standard deduction is Rs 63,750.

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