If your salary is Rs 13 lakh and we divide it into 4 parts according to the tax slab. First Rs 4 lakh, second Rs 4 lakh, third Rs 4 lakh and the remaining Rs 1 lakh. There is no tax on the first Rs 4 lakh. Now the next part of Rs 4 to 8 lakh will attract 5 percent tax, which means it will be Rs 20 thousand. Now the part of Rs 8 to 12 lakh will attract 10 percent tax. Which will be around Rs 40 thousand. Now the remaining last Rs 1 lakh. This Rs 1 lakh will be taxed at 15 percent.
Income Tax: Today the government has announced tax exemption on income up to 12 lakhs, but people have many questions about it, like if someone’s salary is 13 lakhs then how much tax will be levied on it? Along with this, the biggest confusion is that if tax is exempted on income up to 12 lakhs, then will tax have to be paid only on one lakh? The answer is – no.
One question people have is that if the salary is 13 lakhs, do we have to pay 15 percent tax? The answer to this is also – no.
The third question related to this is that when income up to 12 lakhs is tax free, then why has the government given this slab system, why 5 percent income tax on income of 4 to 8 lakhs, why 10 percent income tax on income of 8 to 12 lakhs?
Now let’s answer all the questions one by one.
If your salary is 13 lakh rupees and we divide it into 4 parts according to the tax slab. First 4 lakh, second 4 lakh, third 4 lakh and the remaining 1 lakh. There is no tax on the first 4 lakh rupees. Now the next part of 4 to 8 lakh will be taxed at 5 percent, which means it will be 20 thousand rupees. Now the part of 8 to 12 lakh rupees will be taxed at 10 percent. Which will be around 40 thousand rupees. Now the remaining last 1 lakh rupees. This 1 lakh rupees will come under 15 percent tax… Now 15 percent of 1 lakh is 15 thousand rupees. Now if we add the tax on the entire amount, it will be 75 thousand rupees. That means a person with an income of 13 lakh will have to pay 75 thousand rupees as tax.
The tax system for the salaried people will also work on this formula. For example, tax of Rs 90,000 will be levied on 14 lakh income, Rs 105,000 on 15 lakh and Rs 1,20,000 on 16 lakh. According to the old tax slab, tax of Rs 1,70,000 was to be paid on Rs 16 lakh, but according to the new slab, tax of only Rs 1,20,000 will have to be paid. That means he will benefit here too.
Know how much tax you will save
Who will get the benefit of tax exemption?
Many people are confused that this decision has been implemented only for the employed people, however the government has clearly said in the budget that whether you are employed, do some business or run a shop, if your annual income is 12 lakhs or less, then you do not need to pay income tax. One advantage for the employed people in this is that they will continue to get the benefit of standard deduction of 75 thousand rupees along with this exemption. For example, if the annual salary of a salaried person is 12 lakh 75 thousand rupees, then by getting standard deduction of 75 thousand rupees, his salary will become 12 lakhs and he will not have to pay any income tax.
