Zero Tax Till Rs 12 Lakh: What’s the Difference?
In a significant move, Finance Minister Nirmala Sitharaman has introduced changes to the tax slabs and rates under the New Tax Regime, allowing individuals with an income of up to Rs 12 lakh to enjoy zero tax liability. But what does this mean? Let’s break down the key components: rebate under Section 87A, exemptions, and deductions.
Understanding Section 87A Rebate
The rebate under Section 87A is a provision that provides tax relief to individuals earning a taxable income up to Rs 7 lakh. If your taxable income falls within this threshold, you can claim a rebate of up to Rs 1,500, effectively reducing your tax liability to zero. However, with the new changes, if your total income is up to Rs 12 lakh, you can benefit from a standard deduction and other exemptions, making it possible to not pay any tax.
Exemptions vs. Deductions
Exemptions and deductions play crucial roles in tax calculation. Exemptions refer to specific incomes that are not taxable, such as agricultural income or certain allowances, while deductions are expenses that can be subtracted from your total income before tax is calculated, like contributions to retirement funds or insurance premiums.
How to Maximize Your Benefits?
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Conclusion
With the new tax regime, understanding the differences between rebates, exemptions, and deductions is essential for optimizing your tax returns. Educate yourself, plan wisely, and enjoy the benefits of zero tax up to Rs 12 lakh!
