Income Tax Slabs for FY 2024-25 (AY 2025-26): A Comprehensive Guide
The income tax framework for the financial year 2024-25 introduces significant revisions aimed at easing the tax burden for specific income groups while incentivizing a switch to the new tax regime. Here’s a detailed breakdown of the latest tax slabs, key changes, and features of both the new and old regimes to help taxpayers make informed decisions.
What is an Income Tax Slab?
Income tax in India is levied on individuals based on their annual income, categorized into income slabs. These slabs are designed to ensure a progressive tax structure where higher-income earners contribute a larger share to the tax pool. Tax slabs are periodically updated during budget announcements, aligning with the nation’s fiscal goals.
Age-Based Taxpayer Categories
- Individuals below 60 years.
- Senior Citizens (60 to 80 years).
- Super Senior Citizens (Above 80 years).
New Tax Regime: Revised Income Tax Slabs for FY 2024-25
The government has made the new tax regime more appealing by adjusting the tax slabs and increasing deductions. Here are the updated slabs:
| Income Range (₹) | Tax Rate |
|---|---|
| Up to ₹3,00,000 | NIL |
| ₹3,00,001 – ₹7,00,000 | 5% (Rebate u/s 87A ensures no tax up to ₹7 lakh) |
| ₹7,00,001 – ₹10,00,000 | 10% |
| ₹10,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Key Features of the New Tax Regime
- Default Regime: The new tax regime is now the default option, though individuals can opt for the old regime annually.
- Basic Exemption Limit: Increased to ₹3 lakh across all age groups.
- Standard Deduction: Raised from ₹50,000 to ₹75,000 for salaried employees.
- Section 87A Rebate: Ensures no tax liability for individuals with income up to ₹7 lakh.
- Capped Surcharge: The highest surcharge for incomes above ₹2 crore is capped at 25%, benefiting ultra-high-income earners.
- National Pension System (NPS): Employer contributions to NPS now qualify for deductions of up to 14% (previously 10%) for central government employees.
Old Tax Regime: Income Tax Slabs
The old regime continues unchanged and provides deductions and exemptions, making it suitable for taxpayers with substantial eligible investments and expenses.
Individuals Below 60 Years
| Income Range (₹) | Tax Rate |
|---|---|
| Up to ₹2,50,000 | NIL |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Senior Citizens (60-80 Years)
| Income Range (₹) | Tax Rate |
|---|---|
| Up to ₹3,00,000 | NIL |
| ₹3,00,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Super Senior Citizens (Above 80 Years)
| Income Range (₹) | Tax Rate |
|---|---|
| Up to ₹5,00,000 | NIL |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Comparison: Old vs. New Tax Regime
| Income Range (₹) | Old Tax Regime | New Tax Regime (FY 24-25) |
|---|---|---|
| Up to ₹3,00,000 | NIL | NIL |
| ₹3,00,001 – ₹7,00,000 | 5% | 5% (Rebate ensures NIL) |
| ₹7,00,001 – ₹10,00,000 | 20% | 10% |
| ₹10,00,001 – ₹12,00,000 | 30% | 15% |
| ₹12,00,001 – ₹15,00,000 | 30% | 20% |
| Above ₹15,00,000 | 30% | 30% |
Key Changes in Budget 2024
- Expansion of Tax Slabs: The 5% and 10% slabs now cover wider income ranges.
- Higher Standard Deduction: Increased to ₹75,000 for salaried employees.
- Family Pension Deduction: Raised from ₹15,000 to ₹25,000.
- NPS Contributions for Minors: The new NPS-Vatsalya scheme allows contributions for minors, convertible to regular accounts upon adulthood.
Choosing Between Old and New Regimes
Benefits of the New Regime
- Simplified tax structure with no requirement for documentation of deductions.
- Lower tax rates for individuals without significant deductions.
- Tax rebate ensures zero liability up to ₹7 lakh.
Benefits of the Old Regime
- Extensive deductions (e.g., HRA, 80C, 80D) for individuals with investments or expenses.
- Suitable for taxpayers with housing loans and medical insurance.
Surcharge and Cess
- Surcharge: Capped at 25% for incomes above ₹2 crore under the new regime.
- Health & Education Cess: 4% on the total tax and surcharge.
Conclusion
The revised income tax slabs for FY 2024-25 introduce a more attractive new tax regime while retaining the old regime for flexibility. Taxpayers should evaluate their income structure, deductions, and financial goals to select the regime that optimizes their liabilities. Consulting a tax professional can further streamline this decision-making process.
