With zero tax upto Rs 12 lakh, you will take home the same as someone with income of Rs 12.71 lakh. Here’s why
Zero tax up to Rs 12 lakh taxable income is good news. But you start to lose as soon as you cross that threshold – until your taxable income reaches Rs 12.71 lakh. See the math.
Union Finance Minister Nirmala Sitharaman arrives to present the Union Budget 2025-26 at the Parliament House complex, in New Delhi, on Saturday. (PTI photo/Shahbaz Khan) The announcement of Nil tax for those with taxable income of up to Rs 12 lakh has brought cheer to all who fall in that category. However, many who are marginally above that ceiling will end up taking a lesser amount home despite having a higher salary. This is why:
While the rebate announced by Finance Minister Nirmala Sitharaman in the Union Budget ensures that those earning up to Rs 12 lakh will have zero tax liability, the tax liability shoots up to Rs 61,500 if the taxable income breaches Rs 12 lakh – and hits Rs 12.1 lakh.
Thus, an employee having a taxable income of Rs 12.1 lakh takes home Rs 51,500 less than an individual having a taxable income of Rs 12 lakh.
It is also important to note that if your salary increases from under Rs 12 lakh to little over Rs 12 lakh, it may lead to a decline in the take-home component.
A quick calculation shows that parity in terms of take-home salary is achieved only at the income level of Rs 12.71 lakh. At this income, the tax is Rs 70,500, which means the take-home salary is equal to Rs 12 lakh, and is equivalent to what an individual earning Rs 12 lakh would take home.
In other words, an individual with taxable income of Rs 12 lakh will take home the same amount as an individual having a taxable income of Rs 12.71 lakh.
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