In the last 6 months the consumption is coming down because the inflation has increased and thus middle class doesn't have much money to spend. And because of that the economy was going down. Now to tackle that there is two options. One to reduce the tax but with this option only people who are in debt will be benefit. The next option was to reduce the tax and with that everyone who is in tax bracket will have more money in their pocket.
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Now with that money the consumption will increase. From this fiscal year, minimum Rs 5K per month will be saved by every individual whose salary is minimum 12 Lakhs per annum. Now this money saved from the tax will be spent to reducing the burden of the middle class and along with that the money will be invested.
The new tax slabs which is being announced yesterday apply to everyone.
However, if someone total taxable income is ₹12 lakh or below, a rebate of Rs 60K is provided to nullify the tax.
Tax calculation as per new slabs:
₹0 - ₹4 lakh → 0% tax = ₹0
₹4 - ₹8 lakh → 5% tax = ₹20,000
₹8 - ₹12 lakh → 10% tax = ₹40,000
Total tax before rebate = ₹60,000
Rebate under Section 87A: ₹60,000
So if someone's salary is Rs 1 Lakh per month then they don't have to pay any tax. So the definition of middle class is been shown in the tax slab itself. Government thinks that whoever is earning 1 Lakh Per month or below comes under the middle class.
So this is actually a biggest income tax rebate in recent times and it has given more money in the hand of individuals to spend and that's actually a good thing. One thing to note here that the rebate is only for nre tax regime and there is no rebate also.
