Income Tax Slabs for AY 2025-26 (FY 2024-25) – New & Old Regime

Income tax is a direct tax which follows a progressive slab system, where tax rates increase with higher income. The taxpayers can choose between the old regime, which offers deductions and exemptions, and the new regime, which offers lower tax rates but without deductions and exemptions. In this article, we will explore the different slabs under both the old and new regimes and help you understand which one is more beneficial for you.

Income Tax Slabs for FY 2025-26 (AY 2026-27)

Under the Budget 2025, individuals with income up to Rs. 12,00,000 will have zero tax liability for FY 2025-26 (AY 2026-27) under the new tax regime. The revised tax slabs are as follows:

With the revised tax structure, individuals earning up to Rs.12,00,000 will have no tax liability due to the increased rebate of Rs.60,000. For salaried individuals, the tax liability will be zero for incomes up to Rs.12,75,000, due to the Rs.75,000 standard deduction.

Note:

• The marginal relief on the rebate is still applicable. 
• The rebate is not available for income that is taxed at special rates (e.g., capital gains under section 112A).

An illustrative image of changes made in Budget 2025 is given below.

Tax Savings Across Various Income Levels

The revisions to the tax slabs will lead to substantial savings for taxpayers. Here's a breakdown of the tax savings across different income levels:

Let’s understand the tax liability and rebate eligibility for different levels of income:

Scenario 1 - If your income is Rs.11.9 lakh 

• Your tax liability will be Nil as your income is below Rs.12 lakh, as you will be eligible for rebate under section 87A.

Scenario 2 - If your income is Rs. 12.75 lakh 

• If you are a salaried individual, your tax liability will be nil.
• You can claim a standard deduction of Rs. 75,000.
• This deduction makes you eligible for a rebate under Section 87A, as your income is below Rs. 12 lakh.

Scenario 3 - If your income is Rs. 14 lakh

Since the income exceeds Rs. 12.75 lakh, the rebate will no longer apply, and the income will be taxed according to the applicable slab rates.

Taxable income: Rs. 14 lakh - Rs. 75,000 = Rs. 13.25 lakh

Tax Calculation: 

Key Interpretations

• Income up to Rs. 4 lakhs is exempt from tax.
• Due to the rebate under Section 87A, non-salaried employees with income up to Rs. 12 lakh will have zero tax liability.
• For salaried employees, income up to Rs. 12.75 lakh will have zero tax liability due to the standard deduction of Rs. 75,000 and rebate.
• Any income exceeding Rs. 12.75 lakh will be taxed according to the applicable tax slabs.

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

The tax slabs for FY 2024-25 (AY 2025-26) are as follows:

Note:

• Rebate: Tax rebate up to Rs.25,000 is applicable if the total income does not exceed Rs.7,00,000 (not applicable for NRIs). Therefore, no tax for an income up-to Rs.7,00,000. 
• Standard Deduction: The standard deduction for salaried employees is Rs.75,000 under the new regime.
• Deduction under Family Pension: The deduction on family pension received has been increased from Rs.15,000 to Rs.25,000. 
• Standard Deduction: The standard deduction for salaried employees is Rs.75,000 under the new regime.
• NPS Contribution: The deduction limit on employer's contribution to NPS is 14% for FY 2024-25.

As a result of the above changes, a salaried employee in the new tax regime can save up to Rs.17,500 in taxes. 

The new regime is the default tax regime. If individuals want to choose the old regime then they have to file Form 10-IEA. The highest surcharge rate is 25% under the new regime as opposed to 37% in the old regime.

Revised Income Tax Slabs Under the New Regime:

The tax slabs is modified by the government for FY 2024-25. This has resulted in certain relaxations. The gist of changes made in the slab rates is given below:

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

There were no changes made to the tax slabs under the old regime in the budget 2024. The tax slabs under the old regime are as follows:

NOTE: Surcharge and cess will be applicable.

Old vs New Tax Regime Slabs Comparison for FY 2024-25 (AY 2025-26)

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

Individuals with net taxable income less than or equal to Rs.5 lakh will be eligible for tax rebate u/s 87A under the old tax regime, i.e. tax liability will be NIL.

Important Points to note if you select the new tax regime:

• Please note that the tax rates in the New tax regime are the same for all categories of Individuals, i.e. Individuals, Senior citizens, and Super senior citizens. 
• Individuals with net taxable income less than or equal to Rs.7 lakh will be eligible for tax rebate u/s 87A, i.e. tax liability will be NIL under the new regime.

The tax slabs under the new tax regime across different years is shown below.

What is Marginal Relief?

Marginal relief is a benefit offered to taxpayers whose income slightly exceeds the threshold at which they would otherwise have zero tax liability i.e. exceeds Rs. 12,00,000 for FY 2025-26.

It ensures that the tax payable does not excessively surpass the incremental income earned.

Here’s the comparison of tax payable with and without marginal relief:

Example: Marginal relief Calculation at the income level Rs. 12,50,000:

*Calculation is done excluding cess

What is Surcharge?

If income exceeds a certain threshold, additional taxes must be paid over and above existing tax rates. This is an additional tax on High-Income Earners.

Surcharge rates are as below:

 *The highest surcharge rate of 37% has been reduced to 25% under the new tax regime. (applicable from 1st April 2023)

• Surcharge rates of 25% or 37% will not apply to the 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). Therefore, the highest surcharge rate on the tax payable for such incomes will be 15%.
• The surcharge rate for an Association of Persons (AOP) consisting entirely of companies will also be limited to 15%.

Additional Health and Education cess at the rate of 4% will be added to the income tax liability.

What are the Exemptions and Deductions Not Available Under the New Regime?

The following are some of the major deductions and exemptions that are not available under the new tax regime:

Salary:

• Professional tax and entertainment allowance on salaries
• Leave Travel Allowance (LTA)
• House Rent Allowance (HRA)
• Allowances to MPs/MLAs 
• Helper allowance
• Children education allowance
• Other special allowances [Section 10(14)]

House property:

• Interest on housing loan on the self-occupied property or vacant property (Section 24)

Other sources:

• Minor child income allowance

Business or profession:

• Additional depreciation under section 32(1)(iia)
• Deductions under section 32AD, 33AB, 33ABA
• Various deductions for donation for or expenditure on scientific research contained in section 35(2AA) or 35(1)(ii) or (iia) or (iii)
• Deduction under section 35AD or section 35CCC
• Exemption under section 10AA for SEZ units

Chapter VI A deductions:

• The deduction under Section 80TTA/80TTB 
• Section 80C, 80D, 80E and so on, except Section 80CCD(2) and Section 80JJAA
• Exemption or deduction for any other perquisites or allowances including food allowance of Rs.50/meal subject to 2 meals a day
• Employee's (own) contribution to NPS
• Donation to Political party/trust, etc

What are the Exemptions and Deductions Available Under the New Regime?

The following are deductions and exemptions that are available under the new tax regime:

Salary:

• Transport allowances in case of a specially-abled person.
• Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment.
• Any compensation received to meet the cost of travel on tour or transfer.
• Daily allowance received to meet the ordinary regular charges or expenditure you incur on account of absence from his regular place of duty.
• Perquisites for official purposes
• Exemption on voluntary retirement 10(10C), gratuity u/s 10(10) and Leave encashment u/s 10(10AA)
• Budget 2023 introduced a standard deduction of Rs.50,000 under New Tax Regime applicable from FY 2023-24. This has been increased to Rs.75,000 in Budget 2024 applicable from FY 2024-25 

House property:

• Interest on Home Loan on let-out property (Section 24)

Other sources:

• Gifts up to Rs. 50,000
• Budget 2023 also introduced deduction under Section 57(iia) of family pension income. In Budget 2024 Limit of maximum Deduction under Family Pension has been increased from Rs.15,000 to Rs.25,000. 

Chapter VI A deductions:

• Deduction for employer’s contribution to NPS account [Section 80CCD(2)]
• Deduction for additional employee cost (Section 80JJA)
• Budget 2023 further introduced deduction of amount paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2)
• The deduction on employers contribution to pension Scheme as per Section 80CCD (2) has been increased from 10% of salary to the 14% of salary in Budget 2024.

Old Tax Regime Vs New Tax Regime - Analysis of Deductions

A comparative analysis of deductions available in new regime and old regime is given below:

Here's a detailed list of exemptions and deductions available under the Old vs New Regime.

Old Tax Regime Vs New Tax Regime - Which is Better?

The new tax regime can largely benefit middle-class taxpayers who have a taxable income of up to Rs.15 lakh. The old regime is a better option for high-income earners.

Since the Basic Exemption Limit of Rs.5,00,000 is relaxed for super-senior citizens, the old regime is beneficial for them, even if they are middle-class earners.

The new income tax regime is beneficial for people who make low investments. As the new regime offers six lower-income tax slabs, anyone paying taxes without claiming tax deductions can benefit from paying a lower rate of tax under the new tax regime. For instance, the assessee having total income before deduction up to Rs.12 lakh will have higher tax liability under the old system if they have investments less than Rs.3,12,500. Therefore, if you invest less in tax-saving schemes, go for the new regime.

That being said, if you already have in place a financial plan for wealth creation by making investments in tax-saving instruments; medical claims and life insurance; making payments of children’s tuition fees; payment of EMIs on education loan; buying a house with a home loan; and so on, the old regime helps you with higher tax deductions and lower tax outgo.

In light of the above and considering the new income tax regime, if taxpayers want to opt for the concessional tax rates, they may evaluate both regimes. Hence, it is advisable to do a comparative evaluation and analysis under both regimes and then choose the most beneficial one, as it may vary from person to person. 

When Can I Opt for Old vs New Regime?

Income Tax Rate for Domestic Companies 

*Please refer to the new sections for checking the applicability for the above concessional income tax rates.

NOTE:

• Additional Health and Education cess at the rate of 4 % will be added to the income tax liability in all cases.
• Surcharge applicable for companies is as below:
• 7% of Income tax where total income > Rs.1 crore,
• 12% of Income tax where total income > Rs.10 crore,
• 10% of income tax where domestic company opted for section 115BAA and 115BAB.

Income Tax Rate for Partnership Firm or LLP as per Old/New Regime

A partnership firm/ LLP is taxable at 30%.                  
NOTE:

• 12% Surcharge is levied on income is more than Rs.1 crore
• Health and Education Cess at the rate of 4% will be applicable
• No concessional rates are introduced for firms LLPs in the next tax regime

Income Tax Slab for FY 2024-25 for Domestic Companies

NOTE:

• In addition cess and surcharge are levied as follows: 
  • Cess: 4% of corporate tax
  • Surcharge applicability:
    • Taxable income is more than 1 Crore but less than 10 Crores: 7%
    • Taxable income is more than 10 Crores: 12%

Income Tax Slab Rates for FY 2019-20, FY 2020-21, FY 2021-22 and FY 2022-23

Income Tax Slab for Individual Aged Below 60 Years & HUF

NOTE:

• Income tax exemption limit is up to Rs.2,50,000 for Individuals, HUF below 60 years aged and NRIs
• Surcharge and cess will be applicable as discussed above 
• An additional 4% Health & education cess will be applicable on the tax and surcharge amount

Income Tax Slab for Individual Aged Above 60 Years to 80 Years

NOTE:

• Income tax exemption limit is up to Rs.3 lakh for senior citizens aged above 60 years but less than 80 years.
• Surcharge and cess will be applicable as discussed above

Income Tax Slab for Individual Aged More Than 80 Years

NOTE:

• Income tax exemption limit is up to Rs.5 lakh for super senior citizen aged above 80 years.
• Surcharge and cess will be applicable as discussed above.

Income Tax Slab FY 2019-20, FY 2020-21, FY 2021-22 and FY 2022-23 for Domestic Companies

NOTE:

• In addition cess and surcharge are levied as follows: 
  • Cess: 4% of corporate tax
  • Surcharge applicability:
    • Taxable income is more than 1 Crore but less than 10 Crores: 7%
    • Taxable income is more than 10 Crores: 12%

FY 2018-19: Income Tax Slab Rates 

Income Tax Slab for Individual Aged Below 60 Years & HUF

NOTE:

• An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
• Surcharge applicability:
  • 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
  • 15% of income tax, where the total income exceeds Rs.1 crore.

Income Tax Slab for Individuals Aged Above 60 Years to 80 Years

NOTE:

• An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
• Surcharge applicability:
  • 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
  • 15% of income tax, where the total income exceeds Rs.1 crore. 

Income Tax Slab for Individuals Aged More Than 80 Years

NOTE:

• An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
• Surcharge applicability:
  • 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
  • 5% of income tax, where the total income exceeds Rs.1 crore

Final Word

Even if income falls under the greater slabs, the proper understanding of deductions and exemptions can make our taxable income fall under lower slabs and reduce our tax incidence. Understanding the slab rates and the deductions available under the respective slab rates is crucial for effective compliance with the tax laws and efficient tax planning.

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How To Save Tax For Salary Above 50 Lakhs?      
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