Union Finance Minister Nirmala Sitharaman's announcement of no tax will be payable on annual income up to Rs 12 lakh was highlight of her 8th budget presented under the Modi government on Saturday. Over 100 announcements pertaining to sectors ranging from agriculture to health, education, and innovation were made. But what caught the limelight was income tax!

Acknowledging the efforts of the middle class in strengthening the country and admiring its determination, the finance minister announced no tax on annual income up to Rs 12 lakh. The announcement came as a major relief for the middle-class salaried group, which often feels itself sandwiched between rising prices and tax burdens.

The announcement from the finance minister sent a wave of optimism in the parliament as well, with Prime Minister Narendra Modi, Defence Minister Rajnath Singh, all BJP leaders, and even the opposition leaders tapping the benches—a symbolic gesture of approval.

But what came next left most of us perplexed. Sitharaman, shortly after announcing the good news, started listing tax slabs!

If you are not from the finance field, most likely the biggest question in your mind would be-- What are these slabs for when the income upto Rs 12 lakh is tax-free?

Here is the catch!

If you are earning Rs 12 lakh, you will not have to pay any tax. Similarly, there is a tax rebate of Rs 75,000 for those earning salary upto 12 lakh, making income upto Rs 12,75,000 tax free.

If you earn Rs 12 lakh a year

However, if your salary is above 12.75 lakh, then you will be applicable to the tax slab.

Our expert CA Harigopal Patidar (Partner at HPN & Company, Bhopal) explains: Let's say, your annual income is Rs 18,00,000, then your income upto Rs 4 lakh will be completely exempted.

If you earn Rs 18 lakh a year

First Rs 4 lakh-- No Tax

Rs 4 to Rs 8 lakh-- 5% tax = 20k

Rs 8,00,001 to 12 lakh Rs-- 10% =40k

Rs 12,00,001 to 16 lakh-- 15% = 60k

Health & Education Cess @ 4% = 6400

Total Tax payable: Rs 1,66,400. Calculation as per newly announced tax structure saved Rs 72,800 tax on the same income, compared to the 2024 Income Tax slabs.

**The calculation is exclusive of deductions

'New tax structure will help save huge amount of tax'

CA Patidar hailed the new tax structure, saying it will help people save a huge amount of tax. "Earlier, flat 30% tax was applicable on income above Rs 15 lakh. Now, the government has proposed to reduce the tax rate and increased income range in every slab by atleast Rs 1 lakh. For instance, earlier, income between Rs 7 lakh to Rs 10 lakh was taxed at 10% and that between Rs 10 lakh to Rs 12 lakh at 15%. But, now income between Rs 8 lakh to Rs 12 lakh attracts only 10% tax. This will leave improve personal disposable income, which in turn will give a boost to economy."

Tax Calculation if your annual salary is Rs 24 lakh

How much tax you will pay in case of annual income of Rs 50 lakh?