Understanding income tax slabs is crucial for managing your finances and planning your taxes effectively. In India, the tax system is designed to be progressive, ensuring fairness by taxing higher incomes at higher rates.
The Union Budget 2024 introduced significant updates, especially under the new tax regime, aiming to simplify tax compliance and benefit taxpayers. Here's a detailed breakdown of the income tax slabs and changes for FY 2024-25 (AY 2025-26).
What is an Income Tax Slab?
Income tax in India is levied on individuals based on a slab system, which assigns different tax rates to different income ranges. This progressive structure ensures fairness, as individuals with higher incomes pay proportionally more in taxes. The slab rates are periodically updated, generally during the annual budget, and vary for different categories of taxpayers
Overview of Tax Regimes: New vs. Old
The Income-tax Act, 1961 provides two tax regimes:
- Old Tax Regime: Allows various deductions and exemptions but comes with higher tax rates.
- New Tax Regime: Offers lower tax rates without deductions or exemptions, encouraging simplicity.
Taxpayers have the flexibility to choose between these regimes based on their financial situation.
Key Changes in the New Tax Regime (Budget 2024)
The Union Budget 2024 introduced several updates to the new tax regime, making it more appealing for taxpayers:
- Revised Slabs: Broader income ranges in lower tax brackets.
- Enhanced Standard Deduction: Increased to ₹75,000 for salaried employees.
- Family Pension Deduction: Raised to ₹25,000 from ₹15,000.
- NPS Contribution: Employer contribution deduction increased to 14% from 10%.
These changes collectively allow a salaried individual to save up to ₹17,500 in taxes under the new regime.
Income Tax Slabs for FY 2024-25: New Regime
The new tax regime offers simplified slabs with lower rates, as detailed below:
| Income Range | Tax Rate |
|---|---|
| Up to ₹3 lakh | NIL |
| ₹3 lakh - ₹7 lakh | 5% |
| ₹7 lakh - ₹10 lakh | 10% |
| ₹10 lakh - ₹12 lakh | 15% |
| ₹12 lakh - ₹15 lakh | 20% |
| Above ₹15 lakh | 30% |
Key Note:
- Tax rebate of ₹25,000 is available if total income does not exceed ₹7 lakh (u/s 87A).
- Not applicable for NRIs.
Income Tax Slabs for FY 2024-25: Old Regime
The old regime's slabs remain unchanged and are categorized based on the taxpayer's age:
Individuals Below 60 Years and HUF:
| Income Range | Tax Rate |
|---|---|
| Up to ₹2.5 lakh | NIL |
| ₹2.5 lakh - ₹5 lakh | 5% |
| ₹5 lakh - ₹10 lakh | 20% |
| Above ₹10 lakh | 30% |
Senior Citizens (60–80 Years):
| Income Range | Tax Rate |
|---|---|
| Up to ₹3 lakh | NIL |
| ₹3 lakh - ₹5 lakh | 5% |
| ₹5 lakh - ₹10 lakh | 20% |
| Above ₹10 lakh | 30% |
Super Senior Citizens (Above 80 Years):
| Income Range | Tax Rate |
|---|---|
| Up to ₹5 lakh | NIL |
| ₹5 lakh - ₹10 lakh | 20% |
| Above ₹10 lakh | 30% |
New Tax Regime vs. Old Tax Regime: A Comparison
The following table highlights the differences in tax rates for both regimes:
| Income Range | Old Regime Rate | New Regime Rate |
|---|---|---|
| Up to ₹2.5 lakh | NIL | NIL |
| ₹2.5 lakh - ₹3 lakh | 5% | NIL |
| ₹3 lakh - ₹5 lakh | 5% | 5% |
| ₹5 lakh - ₹7 lakh | 20% | 5% |
| ₹7 lakh - ₹10 lakh | 20% | 10% |
| Above ₹15 lakh | 30% | 30% |
How to Calculate Income Tax
To calculate tax, apply the relevant slab rates to your taxable income. For instance, consider Rohit, who earns ₹8 lakh annually:
Calculation Under Old Regime:
- Up to ₹2.5 lakh: NIL
- ₹2.5 lakh - ₹5 lakh: 5% = ₹12,500
- ₹5 lakh - ₹8 lakh: 20% = ₹60,000
Total Tax: ₹72,500 + 4% cess = ₹75,400
Calculation Under New Regime:
- Up to ₹2.5 lakh: NIL
- ₹3 lakh - ₹7 lakh: 5% = ₹20,000
- ₹7 lakh - ₹10 lakh: 10% = ₹10,000
Total Tax: ₹30,000 + 4% cess = ₹31,200
Conclusion
The updated income tax slabs for FY 2024-25 bring significant changes, especially under the new regime, promoting simplicity and savings. Taxpayers should carefully evaluate both regimes to choose the one that maximizes their benefits.
Additional Resources on Income Tax Slabs for FY 2024-25
Explore these articles for a deeper understanding of income tax slabs, changes introduced in Budget 2024, and the benefits of different tax regimes:
- Bajaj Finserv: Income Tax Slab for FY 2024-25 (AY 2025-26)This article explains the differences between the old and new tax regimes, highlights the changes introduced in Budget 2024, and discusses the benefits of the new regime, such as simplified filing and reduced tax rates.Key Value: Detailed comparison of tax regimes and their benefits.
- Groww: Income Tax Slabs FY 2023-24, 2024-25This resource provides a clear breakdown of income tax slabs under both regimes for FY 2024-25, along with a comparison of rates and exemptions. It also explains how taxpayers can benefit from the changes in the new regime.Key Value: Comprehensive slab details with a focus on tax-saving opportunities.
- ClearTax: Income Tax Slabs for FY 2024-25 (New and Old Regime Tax Rates)ClearTax offers a detailed explanation of the revised income tax slabs under the new regime, including a comparison with the old regime. It also provides insights into which regime is better suited for different income groups.Key Value: Practical guidance on choosing between regimes based on income and investments.
FAQs Related to Income Tax AY 2025-26
𝐖𝐡𝐚𝐭 𝐚𝐫𝐞 𝐭𝐡𝐞 𝐤𝐞𝐲 𝐝𝐢𝐟𝐟𝐞𝐫𝐞𝐧𝐜𝐞𝐬 𝐛𝐞𝐭𝐰𝐞𝐞𝐧 𝐭𝐡𝐞 𝐧𝐞𝐰 𝐭𝐚𝐱 𝐫𝐞𝐠𝐢𝐦𝐞 𝐚𝐧𝐝 𝐭𝐡𝐞 𝐨𝐥𝐝 𝐭𝐚𝐱 𝐫𝐞𝐠𝐢𝐦𝐞 𝐟𝐨𝐫 𝐅𝐘 𝟐𝟎𝟐𝟒-𝟐𝟓?
The new tax regime and the old tax regime differ primarily in terms of tax rates, exemptions, and deductions:
- New Tax Regime:Lower tax rates with simplified slabs.
No major deductions or exemptions (e.g., Section 80C, 80D).
Standard deduction of ₹75,000 for salaried individuals.
Tax rebate under Section 87A ensures no tax liability for incomes up to ₹7 lakh.
- Old Tax Regime:Higher tax rates.
Allows multiple deductions and exemptions (e.g., Section 80C for investments, Section 80D for health insurance premiums).
Suitable for taxpayers with significant eligible investments or expenses.
Taxpayers can choose either regime based on their financial situation and preferences.
𝐇𝐨𝐰 𝐡𝐚𝐬 𝐭𝐡𝐞 𝐔𝐧𝐢𝐨𝐧 𝐁𝐮𝐝𝐠𝐞𝐭 𝟐𝟎𝟐𝟒 𝐢𝐦𝐩𝐚𝐜𝐭𝐞𝐝 𝐭𝐡𝐞 𝐧𝐞𝐰 𝐭𝐚𝐱 𝐫𝐞𝐠𝐢𝐦𝐞?
The Union Budget 2024 introduced several changes to make the new tax regime more attractive:
The basic exemption limit was increased to ₹3 lakh (from ₹2.5 lakh).
The income slab of ₹3 lakh–₹6 lakh was expanded to ₹3 lakh–₹7 lakh, taxed at just 5%.
The standard deduction for salaried individuals was increased to ₹75,000 (from ₹50,000).
Family pension deduction was raised to ₹25,000 (from ₹15,000).
Employer contributions to NPS are now deductible up to 14% (previously 10%).
These changes aim to simplify compliance and provide more savings for taxpayers under the new regime.
𝐖𝐡𝐢𝐜𝐡 𝐭𝐚𝐱 𝐫𝐞𝐠𝐢𝐦𝐞 𝐬𝐡𝐨𝐮𝐥𝐝 𝐈 𝐜𝐡𝐨𝐨𝐬𝐞 𝐟𝐨𝐫 𝐅𝐘 𝟐𝟎𝟐𝟒-𝟐𝟓?
The choice between the new and old tax regimes depends on your income structure and eligible deductions:
Opt for the new tax regime if:You prefer lower tax rates and simplicity.
You do not have significant deductions or exemptions to claim.
Opt for the old tax regime if:You have substantial eligible investments or expenses that qualify for deductions (e.g., under Section 80C, Section 80D).
You are comfortable with higher tax rates in exchange for these benefits.
It is advisable to calculate your tax liability under both regimes before making a decision.
