Income Tax Slabs for FY 2024-25 (AY 2025-26)

What is Income Tax Slab?

The taxpayers in India need to pay income tax based on the income tax slab they fall in. The Income tax slab consists of different ranges of income with different income tax rates. As income increases, the tax rates also increase. The tax slab in India was introduced to enable a fair tax system in the country. Based on these income tax slabs, the taxpayer has to finish ITR filing by the income tax return last date. The changes in the income tax slab are done as per the budget announcement. There are three categories under which income tax is divided:-

• Individuals who are less than 60 years
• Senior citizens with age of 60 to 80 years
• Super senior citizens with an age of above 80 years.

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Income Tax Slab FY 2024-25 (AY 2025-26)

As per the Union Budget 2024, the tax slab under new tax regime has been revised. These revised slab rates will be applicable from 1April 2025. The income tax slab for AY 2025-26 for salaried person has been revised as follows:-

(Note: There is no change under the tax slabs for old tax regime)

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Old Tax Regime Vs. New Tax Regime

A lot of confusion has arisen after Budget 2023 as it has brought many amendments under the new tax regime. This time, the government focused on a new tax regime, making it more attractive for the taxpayers. But with several deductions, the old tax regime has always been the first choice for taxpayers. Let us talk in detail about both these regimes and check which will suit you best.

New Tax Regime

The new tax regime slab was introduced in Budget 2020, effective April 1, 2020. The new regime offers lower tax rates for higher incomes than the old tax regime. It allows you to lower your tax liability subject to certain conditions and is optional.

So, If you choose to calculate your taxes using the new tax regime, most of the deductions and exemptions available under the Income Tax Act 1961 would not be available to you.

However, with the Budget 2023 and Budget 2024, the government offered a few key changes in the new tax regime to make it more attractive:-

Old Tax Regime

The old tax regime in India refers to the system of income tax calculation and slabs that existed before the introduction of the new tax regime. In the old tax regime, individuals have the option to claim various tax deductions and exemptions to reduce their taxable income. The Old Tax Regime offers more than 70 deductions and exemptions to claims like Section 80C, HRA, LTA, and more. This regime is also called the existing tax regime. There is no change in old tax regime slab rate.

Note: The basic exemption limit for individuals above the age of 60 years and below 80 years under the old tax regime is Rs.3,00,000.

The basic exemption limit for individuals above the age of 80 years under the new tax regime is Rs.5,00,000.

If you find ITR filing complicated, you can get assistance from our tax experts and complete your income tax return filing with the help of an online CA.

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Confused about which tax regime suits you best as per your financial situation? Don’t worry! Book Consultation with our tax experts and let them select the best regime for your needs.

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Income Tax Slab Rates for FY 2023-24 (AY 2024-25)

Also, the Government introduced special tax rates for domestic companies under various sections; these can be summarized as:-

Special Tax Rates

Note:
1. In Addition to basic Income Tax, as discussed above, the following are also to be taken care of:-
- Surcharge: Surcharge is levied on the amount of income tax at the following rates if the total income of an assessee exceeds specified limits:-

The rate of surcharge in case of a company opting for taxability under Section 115BAA or Section 115BAB shall be flat 10% irrespective of the amount of total income.

- Health & Education Cess @4%
2. MAT Provisions as per section 115JB would also be applicable while calculating tax payable.

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Income Tax Slab Rates for Senior Citizens

Resident Individuals are categorized into 3 parts under Income Tax Act-

• Individuals whose age is up to 60 years
• Senior citizens - Individuals whose age is 60 to 80 years
• Super senior citizens - Individuals over 80 years of age

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Income Tax Slab Rates for Super Senior Citizens

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Surcharge on Income Tax for FY 23-24

In the event that an individual's income exceeds a certain threshold, additional taxes are levied on top of the existing tax rates. This constitutes an extra tax burden primarily targeted at high-income earners.

The surcharge rates are structured as follows:

• 10% of Income tax if total income is greater than Rs.50 lakh but less than Rs.1 crore.
• 15% of Income tax if total income is greater than Rs.1 crore but less than Rs.2 crore.
• 25% of Income tax if total income is greater than Rs.2 crore but less than Rs.5 crore.
• 37% of Income tax if total income exceeds Rs.5 crore.

It's worth noting that in Budget 2023, the highest surcharge rate of 37% was reduced to 25% under the new tax regime, effective from 1st April 2023.

However, certain income sources are exempted from the highest surcharge rates of 25% or 37%. These include income from dividends and capital gains taxable under sections 111A (Short Term Capital Gain on Shares), 112A (Long Term Capital Gain on Shares), and 115AD (Tax on the income of Foreign Institutional Investors). For such incomes, the highest surcharge rate on the tax payable is capped at 15%.

Additionally, the surcharge rate for an Association of Persons (AOP) consisting entirely of companies is also limited to 15%.

Furthermore, an additional Health and Education cess at the rate of 4% is applied to the income tax liability, contributing to government funds designated for healthcare and educational initiatives.

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What are the Exemptions/Deductions Unavailable Under the New Tax Regime?

The 2020 budget has removed approximately 70 of the 100 exemptions available under the new regime. The following exemptions and deductions are some of the most important ones that would not be available if the new tax regime slab is chosen for tax calculation –

1. House Rent Allowance under Section 10 (13A)
2. Leave Travel Allowance under Section 10(5)
3. Allowances under Section 10(14)
4. Food coupons and other tax-free allowances and perquisites
5. Deductions under Chapter VI A of the Income Tax Act like Section 80C, 80D, 80TTA, etc.
6. Deduction for home loan interest paid for self-owned house property under Sections 24 (b) and Section 80EEA

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What Exemptions/Deductions are Available Under the New Tax Regime?

The following deductions and exemptions would be available under the new tax regime –

1. Employer’s contribution to the NPS for up to 10% of your salary under Section 80CCD (2) [ 14% in case of Central Govt employee]
2. Standard deduction of 30% of net rental income if house property is let out.
3. Home loan interest paid can be deducted from the rental income from the house property. However, loss from the House Property head can not be set off from any other head of income.
4. Transport allowance exemption will be available to Divyang employees to meet the day-to-day travel expenses from the workplace to home.
5. Conveyance allowance will be allowed to meet the expenditure on the conveyance to perform an official duty.
6. Allowances granted will be allowed to meet the cost of traveling on tour or on transfer to the employees.
7. Daily allowance granted for day-to-day ordinary expenses in case of absence from his / her normal place of duty.

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What are the Benefits and Disadvantages of Opting for the Old Tax Regime/the New Tax Regime?

The various benefits and disadvantages of old and new tax regimes include

Important Points to Note if you are Opting for the New Tax Regime

• Simpler Tax Filing: The new regime eliminates most deductions and exemptions, making tax filing a much simpler process. This can be ideal for individuals who find the old regime complicated and time-consuming.
• Lower Tax Rates: In many cases, the new regime offers lower tax rates as compared to the old regime, especially for individuals with incomes up to Rs. 7 lakhs. This can lead to increased disposable income.
• Tax Rebate: Individuals with income up to Rs. 7 lakhs are eligible for a complete tax rebate under the new regime, effectively paying zero tax.
• Increased Liquidity: By eliminating the need for tax-saving investments, the new regime can free up your disposable income for other financial goals.

Drawbacks:

• Limited Deductions and Exemptions: You forego several valuable deductions and exemptions like HRA, LTA, educational expenses, medical insurance, etc., potentially increasing your taxable income.
• No Planning Flexibility: Without deductions, you lose the ability to lower your tax liability through investments and expenses strategically.
• Higher Tax Rates for High Earners: For individuals with incomes exceeding Rs. 10 lakhs, the new regime's tax rates can be higher than the old regime, especially with surcharges added for income above Rs. 5 crores.
• Limited Choice for Long-Term Investors: If you rely on tax-saving instruments for long-term wealth creation, the new regime may not be optimal as you miss out on their benefits.

Additional Points:

• You can switch between the new and old regimes every year at the time of filing your tax return.
• Carefully compare your tax liability under both regimes before making a decision. Tools like tax calculators can help with this.
• Consider your future income growth and investment plans when choosing a regime.
• Consult a tax advisor for personalized guidance based on your specific financial situation.

Example on How to Calculate Income Tax from Income Tax Slabs?

Let's walk through how Pooja, a salaried individual with an annual income of Rs. 8,50,000, calculates her income tax. Pooja has deductions under section 80C amounting to Rs. 1,50,000.

Pooja starts by figuring out her gross taxable income. So, it's Rs. 8,50,000 (her total income) minus Rs. 1,50,000 (deductions), which equals Rs. 7,00,000.

Now, let's dive into the income tax slab. There are three tax slabs in India:

Up to Rs. 5,00,000: 0% tax
Rs. 5,00,001 to Rs. 10,00,000: 20% tax
Above Rs. 10,00,000: 30% tax

Since Pooja's income falls in the Rs. 5,00,001 to Rs. 10,00,000 range, her tax rate is 20%.

Calculating the tax amount involves taking the income in this slab (Rs. 7,00,000 - Rs. 5,00,000) and applying the tax rate (20%). So, Pooja's tax amount within this slab is Rs. 40,000.

Now, surcharge. No worries for Pooja here because the surcharge applies to incomes exceeding Rs. 50 lakhs, and she's below that threshold.

Adding it all up, Pooja's total income tax for the financial year 2023-24 is Rs. 40,000. That's how she figures out her tax liability in a nutshell!

Tax2win’s Old vs New Tax Regime Calculator provides you with all the computations and a detailed comparison of how much your taxability will be as per both regimes (old/new) so that you can decide which one is suitable for you. However, filing ITR yourself can be complicated and time-consuming. Moreover, it is common to miss out on some important deductions available to you due to a lack of knowledge. Therefore, the best way to file an ITR is to hire an online CA who can not only help you file your ITR smoothly but also reduce your tax liability. Hire an Online CA Now!

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