Income tax in India is a direct tax that is levied based on progressive slab rates. As your income increases, so does your tax rate. The Income Tax Act, 1961, allows taxpayers to choose between two regimes: the old regime, which offers several deductions and exemptions, and the new regime, which provides lower tax rates but no exemptions.
In this article, we’ll cover:
In India, income tax is calculated on a slab-based system, which means different tax rates are applied to different income ranges. This progressive system ensures fairness by imposing higher taxes on higher incomes. The slab rates are updated regularly, especially during the annual Union Budget announcements.
Income Tax Slabs for FY 2024-25 (AY 2025-26)
Under the old regime, the following slabs are applicable:
Income Slabs | Tax Rate |
---|---|
Income up to ₹2,50,000 | Nil |
Income from ₹2,50,001 to ₹5,00,000 | 5% |
Income from ₹5,00,001 to ₹10,00,000 | 20% |
Income above ₹10,00,000 | 30% |
A tax rebate of up to ₹12,500 is available under Section 87A if your total income does not exceed ₹5,00,000.
The new tax regime, updated in the Budget 2024, is now the default regime and offers simplified slabs:
Income Slabs | Tax Rate |
---|---|
Income up to ₹3,00,000 | Nil |
Income from ₹3,00,001 to ₹7,00,000 | 5% |
Income from ₹7,00,001 to ₹10,00,000 | 10% |
Income from ₹10,00,001 to ₹12,00,000 | 15% |
Income from ₹12,00,001 to ₹15,00,000 | 20% |
Income above ₹15,00,000 | 30% |
Under the new tax regime, a rebate of ₹25,000 is applicable if your total income does not exceed ₹7,00,000.
Income Slabs | Old Regime (below 60 years) | Old Regime (Senior Citizens) | New Regime FY 2024-25 |
---|---|---|---|
Up to ₹2,50,000 | Nil | Nil | Nil |
₹2,50,001-₹3,00,000 | 5% | Nil | Nil |
₹3,00,001-₹5,00,000 | 5% | 5% | 5% |
₹5,00,001-₹7,00,000 | 20% | 20% | 5% |
₹7,00,001-₹10,00,000 | 20% | 20% | 10% |
₹10,00,001-₹12,00,000 | 30% | 30% | 15% |
₹12,00,001-₹15,00,000 | 30% | 30% | 20% |
Above ₹15,00,000 | 30% | 30% | 30% |
Standard Deduction: The standard deduction under the new regime has been raised to ₹75,000.
Family Pension Deduction: The deduction for family pensions has increased to ₹25,000 from the previous ₹15,000.
Calculating your income tax is simple once you know your applicable slab. Here’s an example for clarity:
Let’s assume Naveen has a taxable income of ₹8,00,000 for FY 2024-25. Here’s how his tax liability will be calculated under the old regime:
Income Slab | Tax Rate | Tax Amount |
---|---|---|
Up to ₹2,50,000 | Nil | Nil |
₹2,50,001-₹5,00,000 | 5% | ₹12,500 |
₹5,00,001-₹8,00,000 | 20% | ₹60,000 |
Total Tax: ₹72,500
Cess (4%): ₹2,900
Total Tax Payable: ₹75,400
Surcharge is applicable on high-income earners as an additional tax on their total income:
An additional 4% health and education cess is levied on the total tax payable.
Missing the ITR filing deadline can lead to various consequences, including:
Old Regime: Ideal for individuals who heavily invest in tax-saving instruments and claim exemptions like HRA, LTA, and deductions under Section 80C.
New Regime: Suitable for those who prefer a simplified structure with lower tax rates but no deductions.
Taxpayers can evaluate their tax liability under both regimes and choose the one that is most beneficial.
Selecting between the old and new tax regimes depends on individual financial goals and investment habits. While the new regime offers lower rates and simplicity, the old regime provides significant tax-saving opportunities for those who can claim deductions.
For expert assistance in filing your ITR or to make the most informed decision, visit www.apkireturn.com or contact our helpline at 766 515 56000.
Yes, individuals with salary income can switch between the old and new tax regimes every financial year when filing their Income Tax Return (ITR). However, individuals with business or professional income can switch only once in a lifetime.
Under the new regime, a rebate of up to ₹25,000 is available if your total income does not exceed ₹7,00,000. In the old regime, the rebate is ₹12,500 for income up to ₹5,00,000.
No, the new tax regime does not allow HRA exemptions. HRA can only be claimed under the old tax regime.
No, under the new regime, the same tax slabs apply to all individuals, regardless of age. In the old regime, senior citizens enjoy higher exemption limits.
If you miss the due date, you may have to pay late fees and interest on any unpaid tax. You also lose certain deductions and exemptions if filing under the old regime. Filing a belated return is still possible but may come with penalties.
Yes, starting FY 2024-25, the standard deduction of ₹75,000 is available under the new tax regime.
Tax is calculated based on progressive slab rates. For example, income up to ₹3,00,000 is tax-free, ₹3,00,001 to ₹7,00,000 is taxed at 5%, and so on. You can use an online tax calculator to determine your exact liability.
A surcharge is an additional tax levied on high-income earners. It starts at 10% for incomes above ₹50 lakh and goes up to 25% for incomes above ₹5 crore in FY 2024-25.
No, most deductions such as Section 80C (investments like PPF, ELSS, etc.) and Section 80D (medical insurance) are not available under the new regime.
The financial year (FY) is the year in which income is earned (e.g., FY 2024-25). The assessment year (AY) is the year in which that income is assessed and taxed (e.g., AY 2025-26 corresponds to FY 2024-25).
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