Imagine this: you earn ₹12 lakh a year. Under the old tax system, you would have been liable to pay income tax on that amount. But starting from FY26, you won’t have to pay any tax at all! The reason for this is that the tax-free limit for individuals has now been enhanced from ₹7 lakh to ₹12 lakh.
At this point, you could be thinking to yourself, “But the income tax slab has a 10% tax for income below ₹12 lakh. Why have I not paid anything?” That’s where a little magic trick called Section 87A rebate comes in. If your tax due is lesser or equal to ₹12 lakh, the government automatically gives you a giant tax deduction in your favor.
Let's see how this works. For example, your income is ₹12.75 lakh but your salary is subjected to a standard deduction of ₹75,000, meaning your taxable income is ₹12 lakh. In a normal scenario, your tax dues would be around ₹60,000. Thankfully, it is not, and thanks to the rebate, poof – your tax has converted to zero!
Let us assume you have also deducted ₹1 lakh on gross rent you receive for a property, resulting in a decline for your taxable income to ₹13 lakh. All of a sudden you are no longer eligible for the rebate, and your tax obligations start. The same can be said when your income is accumulated through capital gains in the stock market, or through the sale of real estate, where no rebate is applicable.
If you're still sticking with the old tax regime, there’s not much that changes for you, except for one small benefit: By investing in the NPS Vatsalya scheme (which allows minors to open an NPS account), you can now claim a ₹50,000 tax deduction—similar to regular NPS contributions.
If you've heard your parents grumbling about tax deductions on their bank interest, here’s some good news:
Previously, if a senior citizen earned more than ₹50,000 in interest, banks would deduct TDS (Tax Deducted at Source). Now, this threshold has increased to ₹1 lakh, which means less hassle for them.
The government has also taken some smart steps to support Make in India.
Here’s the big question : if the government is forgoing ₹1 lakh crore in direct taxes and ₹2,600 crore in indirect taxes, won’t that create a budget shortfall?
Surprisingly, no. Even with these cuts, the fiscal deficit is projected to decrease from 4.8% to 4.4% of GDP in FY26. How?
Two significant developments have recently made headlines:
The Budget offers a mix of tax relief for individuals, incentives for manufacturing, and strategic initiatives designed to boost government revenue without raising tax rates. If everything goes as planned, this could result in increased disposable income, lower energy costs, and a stronger economy in the years ahead.And that’s the Budget—made easy to understand!
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