Income Tax Slabs for FY 2024-25: New & Old Regime Tax Rates
The income tax system in India has undergone several transformations, providing taxpayers with the option to choose between two regimes: the Old Regime with exemptions and deductions and the New Regime with lower tax rates but limited exemptions. For the Financial Year (FY) 2024-25, here is a detailed breakdown of the tax slabs and their implications.
Understanding the Two Regimes
Old Regime
The Old Regime follows the traditional tax structure, allowing taxpayers to claim deductions and exemptions under various sections of the Income Tax Act, such as:
- Section 80C: Investments in ELSS, PPF, NSC, etc., up to ₹1.5 lakh.
- Section 80D: Health insurance premium deductions.
- HRA and LTA exemptions.
This regime suits individuals with significant investments or expenditures that qualify for deductions.
New Regime
Introduced in Budget 2020, the New Regime offers simplified tax slabs with lower rates but forgoes most exemptions and deductions. However, Budget 2023 made the New Regime the default regime while retaining the Old Regime as an option.
Income Tax Slabs for FY 2024-25
New Regime Tax Slabs (FY 2024-25)
| Income Range (₹) | Tax Rate |
|---|---|
| 0 – 3,00,000 | Nil |
| 3,00,001 – 6,00,000 | 5% |
| 6,00,001 – 9,00,000 | 10% |
| 9,00,001 – 12,00,000 | 15% |
| 12,00,001 – 15,00,000 | 20% |
| Above 15,00,000 | 30% |
Key Features:
- Standard Deduction of ₹50,000 for salaried individuals and pensioners is available.
- Rebate under Section 87A for income up to ₹7,00,000. This means no tax liability if taxable income does not exceed ₹7,00,000.
Old Regime Tax Slabs (FY 2024-25)
| Income Range (₹) | Tax Rate |
|---|---|
| 0 – 2,50,000 | Nil |
| 2,50,001 – 5,00,000 | 5% |
| 5,00,001 – 10,00,000 | 20% |
| Above 10,00,000 | 30% |
Key Features:
- Taxpayers can avail deductions under Sections like 80C, 80D, and exemptions such as HRA, LTA, etc.
- Rebate under Section 87A for income up to ₹5,00,000.
Comparison: Old vs New Regime
| Aspect | Old Regime | New Regime |
|---|---|---|
| Tax Rates | Higher tax rates | Lower tax rates |
| Deductions/Exemptions | Available | Minimal |
| Default Regime | Optional | Default |
| Best Suited For | Individuals with significant deductions | Individuals with limited investments |
Choosing the Right Tax Regime
Selecting the optimal tax regime depends on several factors:
- Income Level: Higher-income earners may find the Old Regime advantageous due to deductions.
- Investment Habits: Taxpayers who invest in eligible instruments can benefit more from the Old Regime.
- Expenses: If you have significant expenses eligible for exemptions (e.g., HRA, medical insurance), the Old Regime might be better.
Tip: Use an online tax calculator to simulate tax liability under both regimes before deciding.
Rebate and Surcharge Details
Rebate under Section 87A:
- New Regime: Available for income up to ₹7,00,000 (tax liability = zero).
- Old Regime: Available for income up to ₹5,00,000.
Surcharge Rates:
Applicable for income exceeding ₹50 lakh in both regimes, but capped at 25% for income above ₹2 crore under the New Regime.
| Income Range (₹) | Surcharge Rate |
|---|---|
| 50,00,001 – 1,00,00,000 | 10% |
| 1,00,00,001 – 2,00,00,000 | 15% |
| 2,00,00,001 – 5,00,00,000 | 25% |
| Above 5,00,00,000 | 37% (Old Regime) / 25% (New Regime) |
Steps to Opt for the New Regime
- Salaried taxpayers can inform their employer at the beginning of the financial year.
- At the time of filing Income Tax Returns (ITR), individuals can switch between regimes.
Conclusion
The introduction of the New Regime offers simplicity and lower rates, while the Old Regime caters to individuals leveraging exemptions and deductions. Taxpayers should evaluate their income, investments, and financial goals to decide which regime aligns with their needs for FY 2024-25.
For personalized tax planning or compliance assistance, reach out to BeyondYourFinance for expert advice tailored to your needs.
This blog is for informational purposes only. Please consult a financial advisor for personalized guidance.
