Income Tax Slab Rates in India for FY 2024-25 (AY 2025-26) : Complete Guide

The income tax in India is calculated on a slab basis, and different tax rates are prescribed for different income ranges. Thus, the higher the income, the higher your applicable rate of tax. The income tax, therefore, assures that the taxation system in India is both fair and progressive in nature. Typically, the rates in the slabs are revised every year with the announcement of the Union Budget. In this blog, we have shared all that you need to know about income tax slab rates for FY 2025-26!

Changes to New Tax Regime in Budget 2024

For FY 2024-25 (AY 2025-26), you can choose between the following two tax regimes:

• Old Tax Regime: With more exemptions and deductions.
• New Tax Regime: Lower tax rates with limited exemptions.

There were big changes this year in the New Tax Regime:

• Revised Tax Slab: Higher slabs and reduced rates.
• Increased Standard Deduction: Increased to ₹75,000 for salaried.
• Family Pension Deduction: Increased from ₹ 15,000 to ₹ 25,000.
• Higher NPS Contribution: Employers can now contribute 14% of the basic salary compared to 10% earlier.

Thus, if you are salaried, these proposals may help you save ₹ 17,500 as per the new regime.

Income Tax Slabs in India for FY 2024-25 (New Tax Regime)

Under the revised new tax slab system, here are the applicable rates:

Note: If your income is up to ₹7 lakh, you’ll get a rebate under Section 87A, reducing your tax liability to zero.

Income Tax Slabs in India for FY 2024-25 (Old Tax Regime)

The old regime tax slabs remain unchanged this year:

Individuals Below 60 Years & HUF:

Senior Citizens (60-80 Years):

Super Senior Citizens (80+ Years):

Key Features of the New Tax Regime

Here are the highlights of the new tax regime slabs for FY 2024-25:

1. Default Regime: The new regime is now the default option. If you prefer the old tax regime, you’ll need to file Form 10-IEA.
2. Uniform Basic Exemption Limit: Fixed at ₹3 lakh for all individuals, irrespective of age.
3. Rebate under Section 87A: Zero tax liability for income up to ₹7 lakh.
4. Capped Surcharge: The highest surcharge rate is reduced to 25%, down from 37%.

Comparison: Old Tax Regime vs. New Tax Regime

Here’s how the two regimes stack up:

Calculation of Tax on Salary in India

Let us look into the calculation of the tax liability under the latest taxation regime if your income is ₹ 8,00,000:

• Up to ₹3,00,000: NIL
• ₹3,00,001 to ₹7,00,000: 5% of ₹4,00,000 = ₹20,000
• ₹7,00,001 to ₹8,00,000: 10% of ₹1,00,000 = ₹10,000
• Total Tax: ₹20,000 + ₹10,000 = ₹30,000
• Add 4% health and education cess: ₹1,200
• Final Tax Liability: ₹31,200

Benefits of Opting for the New Tax Regime

• Simpler Filing: It is evident, as you will have less to claim in exemptions and deductions.
• Higher Disposable Income: With lower taxes, there is more money available to you.
• Reduced Surcharge: Only 25%, thus benefiting high-income earners.

However, if one has high exemptions-based reliance like HRA and section 80C investments, then the old regime would probably be a better option.

What is Surcharge?

A surcharge is an extra tax levied on income above specific levels. It is charged in addition to the regular rates of income tax and affects high-income earners chiefly.

Current Surcharge Rates

• 10% Income Tax: This will be applicable on the total income of the individual exceeding ₹50 lakh but not exceeding ₹1 crore.
• 15% Income Tax: This can only be applied when a person's total income is more than ₹1 crore but does not exceed ₹2 crore.
• 25% Income Tax: This can only be applied when the total income exceeds ₹2 crore but does not exceed ₹5 crore.
• 37% Income Tax: Income tax is payable when the total income exceeds ₹5 crore.

Note: Consequent to Budget 2023, the maximum surcharge rate has been reduced from 37% to 25% in the newly proposed tax regime to be effective from April 1, 2023.

Exclusions from Higher Surcharge Rates:

• In the case of income by way of dividend or capital gains chargeable under Sections 111A (STCG on shares), 112A (LTCC on shares), and 115AD (Income of FII), the maximum rate of surcharge will be 15%.
• Where such AOPs have their members as companies alone, the surcharge remains at 15%.
• In addition to the above tax liabilities, a 4% Health and Education Cess is payable on total liability.

Restrictions on Deductions and Exemptions Under the New Tax Regime

The new tax regime slabs simplify taxation by reducing the scope for claiming various deductions and exemptions. Below is a list of major exemptions and deductions not claimable under the new regime:

1. Standard Deductions
   • Section 80TTA/80TTB: Deductions on savings account interest.
   • Professional Tax and Entertainment Allowance on salaries.
2. Allowance-Related Exemptions
   • House Rent Allowance (HRA) and Leave Travel Allowance (LTA).
   • Allowances for MPs/MLAs, minor children’s income, or helpers.
   • Children’s education and other specific allowances under Section 10(14).
3. Investment-Linked Deductions
   • Additional depreciation under Section 32(1)(iia).
   • Deductions under Sections 32AD, 33AB, 33ABA.
   • Deductions on donations for scientific research under Section 35.
   • Deduction on specific investments such as Section 35AD, 35CCC, and 80C (except employer NPS contribution under 80CCD(2)).
4. Housing Loan Interest Deductions
   Interest deductions for self-occupied or vacant properties under Section 24.
5. Miscellaneous
   • Food allowance benefits, political donations, and employee contributions to the National Pension Scheme (NPS).
   • Exemptions on specific perquisites or allowances.

Available Deductions and Exemptions Under the New Tax Regime

Despite the simplified approach, certain exemptions and deductions are still available in the new tax regime:

1. Allowances for Specific Needs
   • Conveyance allowance to cover work-related travel expenses.
   • Compensation for travel costs related to work tours or transfers.
   • Daily allowances for expenses incurred during official duties away from the regular workplace.
2. Exemptions for Specific Payments
   • Section 10(10C): Voluntary retirement benefits.
   • Section 10(10): Gratuity exemptions.
   • Section 10(10AA): Leave encashment.
3. Housing-Related Benefits
   • Interest on home loans for rented-out properties under Section 24.
4. Other Key Exemptions
   • Gifts valued up to ₹50,000.
   • Employer contributions to NPS accounts under Section 80CCD(2).
   • Deductions for additional employee costs under Section 80JJAA.
5. Recent Additions from Budget 2023 & 2024
   • Standard Deduction: ₹50,000 introduced in FY 2023-24, increased to ₹75,000 for FY 2024-25.
   • Section 57(iia): Deductions on family pension income introduced in 2023; limits raised from ₹15,000 to ₹25,000 in 2024.
   • Employer pension contribution under Section 80CCD(2) increased from 10% to 14% of salary.
   • Deduction for contributions to the Agniveer Corpus Fund under Section 80CCH(2).

How to Choose Between the Old and New Tax Regime?

The choice between the old tax regime and the new tax regime depends on your income structure, investments, and financial goals. Here are some pointers to help you decide:

1. Opt for the New Tax Regime If:
   • You prefer a simplified filing process.
   • You don’t claim significant deductions under Section 80C, HRA, or other exemptions.
   • Your annual income is below ₹7 lakh (thanks to the Section 87A rebate).
2. Stick to the Old Tax Regime If:
   • You utilize multiple exemptions and deductions, such as home loan interest, tuition fees, or medical insurance.
   • You’re planning long-term investments in tax-saving instruments like PPF, ELSS, or NSC.

Nature of Income and Timing for Selecting the Tax Regime

1. Income from Salary or Other TDS-Attracting Sources
   • An employee is required to intimate their choice of tax regime at the beginning of the financial year to the employer.
   • If no option is exercised, then the New Tax Regime would be considered as default.
   • Once the regime is selected, the same cannot be changed during the year, but this can be revised later while filing the ITR.
2. Income from Business or Profession
   • Such taxpayers who have income from business or profession are permitted to switch from the old regime to the new regime or vice versa only once during their lifetime.

Income Tax Rates for Domestic Companies

Note:

1. An additional 4% Health and Education Cess is applied in all cases.
2. Surcharge rates for domestic companies:
   • 7% for total income exceeding ₹1 crore.
   • 12% for total income exceeding ₹10 crore.
   • 10% for companies under Sections 115BAA and 115BAB.

Income Tax Rates for Partnership Firms or LLPs

• Partnership firms and LLPs are taxed at 30%, regardless of the chosen tax regime.
• Surcharge: 12% if income exceeds ₹1 crore.
• Health and Education Cess: 4% on the tax liability.
• The new tax regime does not offer concessional rates for partnership firms or LLPs.

Income Tax Slabs in India for Domestic Companies (FY 2022-23 and FY 2024-25)

Final Thoughts

The revision in the income tax slab rates has been made simpler and ensures more disposable income for taxpayers. Though the new regime tax slab has become the default, the choice between old and new regimes should be based on your financial habits, investment goals, and tax-saving preferences. You can also enhance your tax-planning by using PNB Metlife’s income tax calculator and make your tax planning robust, compliant, and optimized.

Related Articles:

Financial Year (FY) and Assessment Year (AY) – Key Differences Explained

Income Tax Slab for Senior Citizens: Benefits, Deductions & Exemptions

Section 10 and 10D: Tax-Free Benefits on Life Insurance Payouts

Income Tax Slab for Senior Citizens: Benefits, Deductions & Exemptions

Section 10 and 10D: Tax-Free Benefits on Life Insurance Payouts

Understanding Section 80E: Tax Benefits on Education Loan Interest

Income Tax Rebate Under Section 87A: As Per Financial Year 2024-25