No income tax on earnings up to ₹12 lakh under the new tax regime; Updated TDS and Tax Collected at Source norms

Budget Relief: No Income Tax on Earnings Up to ₹12 Lakh Under New Tax Regime

In a move that promises significant relief for salaried professionals and middle-class taxpayers, the government has announced an enhanced income tax exemption limit under the new tax regime. Individuals with an annual income of up to ₹12 lakh will now be exempt from paying any income tax, marking a substantial increase from previous thresholds.  

The revised tax structure, part of the government's efforts to simplify the taxation system and boost disposable income, comes alongside updated Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) norms aimed at reducing compliance burdens.  

Key Highlights of the New Tax Regime:

1. Tax Exemption Up to ₹12 Lakh: Under the updated rules, taxpayers opting for the new regime (without deductions) will pay zero tax if their total income does not exceed ₹12 lakh annually.  

2. Lower Tax Slabs for Higher Incomes: For incomes above ₹12 lakh, tax rates remain competitive, with the highest slab of 30% applicable only to earnings over ₹15 lakh.  

3. Simplified TDS/TCS Rules: Revised deduction thresholds aim to minimize unnecessary TDS cuts on small transactions, providing relief to freelancers, small businesses, and investors.  

Why This Matters for Common Taxpayers

For Ramesh Patel, a Delhi-based IT professional earning ₹10 lakh a year, the change means extra savings."Earlier, I had to plan deductions carefully to reduce my tax outgo. Now, under the new regime, my take-home salary increases without any hassle," he says.  

However, experts advise caution.CA Priya Sharma notes, "While the new regime benefits those with fewer investments, taxpayers claiming major deductions like HRA, home loan interest, or insurance premiums should compare both regimes before switching."

Industry and Public Response

The announcement has been welcomed by industry bodies, with FICCI calling it "a progressive step toward easing compliance and enhancing disposable income." Meanwhile, social media is abuzz with mixed reactions—some applaud the simplification, while others urge extending similar benefits under the old regime.  

What’s Next?

The Central Board of Direct Taxes (CBDT) will issue detailed guidelines on the updated TDS/TCS norms by November. Taxpayers must evaluate their options before the financial year-end to maximize savings.