03/02/2025
My annual income is Rs. 13 Lakhs. Since the exemption limit has been raised to 12 Lakhs, I will only have to pay tax on 1 Lakh. WOW!
No, it does not work that way. Let me explain this.
According to the Union Budget announced on 1st Feb 2025, the income tax on salaried employees or other individuals shall be as under:
A. Increased Tax Exemption Threshold
✅ The income tax exemption limit has been raised from ₹7 lakh to ₹12 lakh. That would mean more tax-free income in the hands of individuals, so, higher take home salary
B. Revised Tax Slabs with Lower Rates
✅ That means, Lower tax rates, so, lesser deductions from income leaving even more money in the hands of individual tax payers.
C. Standard Deduction
✅ Standard Deduction increased from ₹50,000 to ₹75,000, benefit of additional tax-free income
This means individuals pay less tax and have more money in hand.
This will help:
✅ Increase disposable income
✅ Increase spending power
✅ Boost household consumption
✅ Increase savings and investments
The chart explains the tax payable across different income categories.
What would you do, with this extra disposable income you would have in your hand. Are you going to spend it on household consumption or make additional investment towards your financial goals.
Please do comment in the comment box.