Why Did Govt Raise Income Tax Exemption to ₹12 Lakh? Nirmala Sitharaman Explains
Nirmala Sitharaman has come out with the announcement of increasing the income tax rebate from ₹7 lakh to ₹12 lakh for the relief of ₹1 lakh monthly earners.

Nirmala Sitharaman Explains: As per the statements from Nirmala Sitharaman, the Union finance minister, the government raised the income tax exemption limit from ₹7 lakh to ₹12 lakh in order to lessen the tax burden on ₹1 lakh-per-month earners.
According to Sitharaman, the government also intends to provide relief across the board to all taxpayers by lowering tax slab rates and widening tax brackets.
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“The government feels that if someone earns Rs1 lakh per month on average, she should not have to pay tax. We are achieving this in two ways: first, by reducing slab rates to create a more uniform, gradually progressive structure; and second, by expanding the tax slabs to provide relief across income groups,” Nirmala Sitharaman was quoted as saying by The Financial Express reported.
Finance Minister Sitharaman explained this shift and its timing in the context of slower expectations of growth in incomes and salaries during a media interaction.
She explained that the government was willing to take such measures to aid taxpayers because of its desire to let them use their saved money for consumption, savings or investment, and beyond the mere slab rate cut with additional rebates given to some taxpayer groups.
“We decided that some people should receive extra benefits beyond mere slab rate reductions. Hence, an extra rebate was introduced. Slab rate reductions apply to everyone, and the extra rebate for some. The expectation is that the money saved by taxpayers will flow back into the economy through consumption, savings, or investment,” the finance minister said.
She also argued that unlike the tax regime of the Congress era, the government believes in offering additional benefits by way of introducing an extra rebate to some of the taxpayers.
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“If you compare what we have done today with what prevailed in 2014 under the Congress government, the narrative has always been about putting money back into the hands of the people. Compared to the 2014 tax rates under the Congress, someone earning ₹8 lakh now has nearly ₹1 lakh more in their pocket. In 2014, the tax on them was ₹1 lakh; now, it is zero. Moreover, someone earning ₹12 lakh had to pay ₹2 lakh in 2014; now, it is zero. That means ₹2 lakh more in their pockets,” said Nirmala Sitharaman.
The finance minister said that the government is lowering taxes for everyone - that is ₹24 lakh earner who paid ₹5.6 lakh taxes will now pay ₹3 lakh and keep ₹2.6 lakh more in his pocket as in the year 2014.
“Moreover, rates for everyone are being brought down. As a result, someone earning ₹24 lakh, who had to pay ₹5.6 lakh in 2014; now they only have to pay ₹3 lakh. That means ₹2.6 lakh more in their pocket. So, it’s not just those earning up to ₹12 lakh who benefit—because they are not paying any tax at all due to the rebate—but even those earning more will benefit,” Sitharaman added.
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