The central government has given relief to the employed citizens in the budget, income up to Rs 12 lakh has been made tax free. There will be no tax on income up to Rs 12.75 lakh. Income above Rs 12 lakh will be taxed. Tax rebate and exemptions…
New Delhi. The central government has given a big relief to the employed citizens in this year’s budget. Income up to Rs 12 lakh has been made tax free. Not only this, if you are employed, then with standard deduction you will not have to pay any tax on income up to Rs 12.75 thousand. But income above that will start getting taxed. The tax calculation will be done from the initial slab.
Now a question arises that if there will be no tax on income up to Rs 12 lakh, then the calculation of tax should start after Rs 12 lakh. For example, if someone’s salary is Rs 13 lakh, then he should pay tax on Rs 1 lakh. As is the case with the initial income of Rs 4 lakh. Income up to Rs 4 lakh is also tax free and is not counted at the time of tax calculation.
What is the difference between 4 lakh and 12 lakh
There is a big difference between the tax exemption of 4 lakh and the tax exemption of 12 lakh. Here you have to understand 3 words related to tax. These words are – exemption, rebate and deduction. Let’s talk about them one by one and you will understand yourself how the exemption of 12 lakh is different from the exemption of 4 lakh.
Exemption- Tax on this amount is zero. It is kept in the tax slab just for name sake but its absence will not make any difference because the tax liability in this slab remains 0. Therefore, the exempted slab is never brought into consideration while calculating tax. Exemption is removed before tax calculation.
Deduction- After this comes deduction. Deduction is used before the calculation of tax. With the help of tax deduction, you try to reduce your taxable income in different ways. For example, the facility of tax deduction is available under section 87A of the Income Tax Act.
Rebate- Now let’s talk about rebate. Tax rebate is given on income up to Rs 12 lakh. In rebate, tax is calculated first. After this, you are given a discount like exemption. This means that your income is still taxable but because it is within a certain limit, the government has given you a discount. But if you cross that limit, then your tax calculation will start from the very first slab. The provision of rebate is under section 87A of the Income Tax Act.
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