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The income tax is a direct tax which follows a progressive slab rate, where the rate of tax increases as the taxpayer's income rises. The Income-tax Act, 1961 provides for two tax regimes: the old regime, which allows various deductions and exemptions, and the new regime, which offers lower tax rates without exemptions.
In this article, we will learn about:
In India, the Income Tax applies to individuals based on a slab system, where different tax rates are assigned to different income ranges. As the person's income increases, the tax rates also increase. This type of taxation allows for a fair and progressive tax system in the country. The income tax slabs are revised periodically, typically during each budget. These slab rates vary for different groups of taxpayers.
The Budget 2024 introduced significant changes to the tax slabs under the New Tax Regime, which will be applicable for FY 2024-25 (AY 2025-26). Taxpayers can now benefit from revised tax slabs, along with an increased standard deduction and an enhanced family pension deduction.
Here’s a breakdown of the revised income tax slabs for FY 2024-25 under the new regime:
Tax Slab for FY 2024-25 | Tax Rate |
Up to Rs 3 lakh | NIL |
Rs 3 lakh - Rs 7 lakh | 5% |
Rs 7 lakh - Rs 10 lakh | 10% |
Rs 10 lakh - Rs 12 lakh | 15% |
Rs 12 lakh - Rs 15 lakh | 20% |
Above Rs 15 lakh | 30% |
Note: Tax rebate up to Rs.25,000 is applicable if the total income does not exceed Rs 7,00,000 (not applicable for NRIs).
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:
Income tax slabs for individuals aged below 60 years & HUF
Income Slabs | Tax rate |
Up to Rs 2,50,000 | NIL |
Rs 2,50,001 - Rs 5,00,000 | 5% |
Rs 5,00,001 to Rs 10,00,000 | 20% |
Rs 10,00,001 and above | 30% |
NOTE:
Income Slabs | Tax Rate |
Up to Rs 3,00,000 | NIL |
Rs 3,00,001 - Rs 5,00,000 | 5% |
Rs 5,00,001 to Rs 10,00,000 | 20% |
Rs 10,00,001 and above | 30% |
NOTE:
Income Slabs | Tax Rate |
Up to Rs 5,00,000 | NIL |
Rs 5,00,001 to Rs 10,00,000 | 20% |
Rs 10,00,001 and above | 30% |
NOTE:
The key features of the new tax regime for FY 2024-25 is as follows:
The Union Budget 2024 has introduced significant updates to the income tax regime, aimed at simplifying the tax structure and providing relief to taxpayers. The revised income tax slabs bring expanded thresholds for certain categories, ensuring more taxpayers benefit from lower rates. These changes not only reflect the government’s commitment to boosting disposable income but also encourage individuals to adopt the new tax regime. The following table depicts the changes made in the new regime to benefit the taxpayers:
Income Tax Slabs for FY 2023-24 | Tax Rates (FY 2023-24) | Income Tax Slabs for FY 2024-25 | Tax Rates (FY 2024-25) | Changes |
Up to Rs 3,00,000 | NIL | Up to Rs 3,00,000 | NIL | No Change |
Rs 3,00,000 - Rs 6,00,000 | 5% | Rs 3,00,000 - Rs 7,00,000 | 5% | Slab expanded by Rs 1,00,000 |
Rs 6,00,000 - Rs 9,00,000 | 10% | Rs 7,00,000 - Rs 10,00,000 | 10% | Slab expanded by Rs 1,00,000 |
Rs 9,00,000 - Rs 12,00,000 | 15% | Rs 10,00,000 - Rs 12,00,000 | 15% | No Change in Rate; New Threshold |
Rs 12,00,000 - Rs 15,00,000 | 20% | Rs 12,00,000 - Rs 15,00,000 | 20% | No Change |
Above Rs 15,00,000 | 30% | Above Rs 15,00,000 | 30% | No Change |
Tax Slabs | Old Tax Regime | New Tax Regime |
Up to Rs 2,50,000 | NIL | NIL |
Rs 2,50,001 - Rs 3,00,000 | 5% | NIL |
Rs 3,00,001 - Rs 5,00,000 | 5% | 5% |
Rs 5,00,001 - Rs 6,00,000 | 20% | 5% |
Rs 6,00,001 - Rs 7,00,000 | 20% | 5% |
Rs 7,00,001 - Rs 9,00,000 | 20% | 10% |
Rs 9,00,001 - Rs 10,00,000 | 20% | 10% |
Rs 10,00,001 - Rs 12,00,000 | 30% | 15% |
Rs 12,00,001 - Rs 12,50,000 | 30% | 20% |
Rs 12,50,001 - Rs 15,00,000 | 30% | 20% |
Rs 15,00,000 and above | 30% | 30% |
Income Slabs | Income Tax Rates |
Up to Rs 3,00,000 | Nil |
Rs 3,00,000 to Rs 7,00,000 | 5% on income which exceeds Rs 3,00,000 |
Rs 7,00,000 to Rs 10,00,000 | Rs. 20,000 + 10% on income more than Rs 7,00,000 |
Rs 10,00,000 to Rs 12,00,000 | Rs. 50,000 + 15% on income more than Rs 10,00,000 |
Rs 12,00,000 to Rs 1500,000 | Rs. 80,000 + 20% on income more than Rs 12,00,000 |
Above Rs 15,00,000 | Rs. 1,40,000 + 30% on income more than Rs 15,00,000 |
Income Slabs | Income Tax Rates |
Up to Rs 3,00,000 | Nil |
Rs 3,00,000 to Rs 6,00,000 | 5% on income which exceeds Rs 3,00,000 |
Rs 6,00,000 to Rs 900,000 | Rs. 15,000 + 10% on income more than Rs 6,00,000 |
Rs 9,00,000 to Rs 12,00,000 | Rs. 45,000 + 15% on income more than Rs 9,00,000 |
Rs 12,00,000 to Rs 1500,000 | Rs. 90,000 + 20% on income more than Rs 12,00,000 |
Above Rs 15,00,000 | Rs. 150,000 + 30% on income more than Rs 15,00,000 |
From FY 2023-24 the new tax regime is the default regime. If you want to file your ITR under the old regime then you have to file Form 10-IEA.
Illustration 1: Rohit has a total taxable income of Rs 8,00,000. This income has been calculated by including income from all sources, such as salary, rental income, and interest income. Deductions under Section 80 have also been reduced. Rohit wants to know his tax dues as per the old regime for FY 2023-24 (AY 2024-2025).
Income Tax Slabs | Tax Rate | Tax Amount |
* up to Rs 2,50,000 | No tax | - |
Rs 2,50,000 – Rs 5,00,000 | 5% (Rs 5,00,000 – Rs 2,50,000) | Rs 12,500 |
Rs 5,00,000 – 10,00,000 | 20% (Rs 8,00,000 – Rs 5,00,000) | Rs 60,000 |
more than Rs 10,00,000 | 30% | - |
Tax |
| Rs 72,500 |
Cess | 4% of Rs 72,500 | Rs 2,900 |
Total tax in FY 2023-24 (AY 2024-25) | Rs 75,400 |
Note:
Please note that Rohit is an individual taxpayer assessee having an income tax exemption of Rs 2,50,000. For other taxpayer assessees, i.e. senior citizens and super senior citizens, the Income-tax limit for availing the exemption would be Rs 3,00,000 & Rs 5,00,000, respectively.
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.
In case the income exceeds a certain threshold, the additional taxes are to be paid over and above existing tax rates. This is an additional tax on the High Income Earners.
Surcharge rates are as below:
10% of Income tax if total income > Rs.50 lakh and < Rs.1 crore,
15% of Income tax if total income > Rs.1 crore and < Rs.2 crore,
25% of Income tax if total income > Rs.2 crore and < Rs.5 crore,
37% of Income tax if total income > Rs.5 crore
*In Budget 2023, the highest surcharge rate of 37% has been reduced to 25% under the new tax regime. (applicable from 1st April 2023)
Additional Health and Education cess at the rate of 4% will be added to the income tax liability.
The following are some of the major deductions and exemptions you cannot claim under the new tax regime:
Under the New tax regime, you can claim tax exemption for the following:
Here's a detailed list of exemptions and deductions available under the Old vs New Regime.
Only the Income tax slabs under the new regimes were revised in the Union Budget 2024. Here's the comparison between tax slab before and after budget:
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.
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. Read a detailed breakdown on this topic here.
Nature of Income | Time of Selection of option of old vs new regime |
Income from Salary or any other head of income attracting TDS | At the start of the financial year, an employee has the choice to select the tax regime and inform their employer, whereas the default regime shall be new tax regime. It cannot be modified during the year. However, the option can be modified when filing the Income Tax Return. |
Income from Business & Profession | In case you have Business or professional income, the choice between tax regimes can only be made once in a lifetime. |
Particulars | Old regime Tax rates | New Regime Tax rates |
Company opts for section 115BAB (not covered in sections 115BA and 115BAA) & is registered on or after October 1, 2019, and has commenced manufacturing on or before 31st March 2024 and subject to the conditions specified in the section. | – | 15% |
Company opts for Section 115BAA, wherein the total income of a company has been calculated without claiming specified deductions, incentives, or exemptions and additional depreciation as specified in the section. | – | 22% |
The company opts for section 115BA registered on or after March 1, 2016 and engaged in the manufacture of any article or thing and does not claim the deduction as specified in the section. | – | 25% |
Turnover or gross receipt of the company is less than Rs. 400 crore in the previous year 2020-21 | 25% | 25% |
Any other domestic company | 30% | 30% |
*Please refer to the new sections for checking the applicability for the above concessional income tax rates.
NOTE:
A partnership firm/ LLP is taxable at 30%.
NOTE:
Turnover Particulars | Tax Rate |
Gross turnover up to 250 Crore in the previous year | 25% |
Gross turnover exceeding 250 Crore in the previous year | 30% |
NOTE:
Related Articles:
Old vs New Tax Regime
Section 115BAC of Income Tax Act
Income Tax Changes From 1 April 2024: New Tax Regime Will Be Default
Form 10-IEA Purpose, Applicability, How to Fill & Submit Form
Tax free Income in India
E-Return Intermediary (ERI) Income Tax
Form 61B of Income-tax Act
Form 26B of Income-tax Act
CRN Number in Income Tax
Income Tax Customer Care
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