Finance Minister Nirmala Sitharaman has made a major announcement regarding income tax. Individuals earning up to ₹12 lakhs annually will now pay no income tax. Over the years, income tax rates in India have changed frequently to meet the needs of the economy and the population. These changes directly impact the common people, making it essential to ensure that the tax system is fair for all income groups.
Changes in Income Tax Rates Over Time
Here’s a brief timeline of how income tax rates have evolved in India:
- 1997-98: Significant Increase
- In 1997, Finance Minister P. Chidambaram introduced major changes in income tax.
- Income above ₹5 lakhs was taxed at 40%, which was the highest rate at the time.
- 2009-10: Introduction of Surcharge
- The government removed the surcharge on personal income tax during this period.
- However, in 2010-11, a 10% surcharge was introduced on income above ₹10 lakhs.
- 2014-15: New Tax Structure
- The Modi government introduced a new tax system.
- Income up to ₹2.5 lakhs was tax-free.
- Income between ₹2.5 lakhs and ₹5 lakhs was taxed at 10%, and income between ₹5 lakhs and ₹10 lakhs was taxed at 20%.
- 2018-19: Health and Education Cess
- The government increased the health and education cess to 4%.
- This added an extra burden on higher-income groups.
- 2020-21: COVID-19 Impact
- During the pandemic, the government provided tax relief by deferring some taxes.
- However, tax rates for higher-income groups remained stable.
- 2021-22: Focus on Stability
- Tax rates were kept unchanged to ensure stability in the system.
- Some special provisions increased taxes for higher-income groups.
Current Tax Rates (2024-25)
Under the New Tax Regime, the current tax structure is as follows:
- Income up to ₹3 lakhs: No tax
- Income between ₹3 lakhs and ₹7 lakhs: 5% tax
- Income between ₹7 lakhs and ₹10 lakhs: 10% tax
- Income between ₹10 lakhs and ₹12 lakhs: 15% tax
New Changes
With the latest announcement, individuals earning up to ₹12 lakhs annually will no longer pay any income tax. This is expected to bring relief to many middle and upper-middle-class taxpayers.
These changes reflect the government’s commitment to simplifying the tax system and providing relief to taxpayers while supporting economic growth.