Income Tax Slabs and Rates for FY 2024-25 (AY 2025-26)
Income tax is a crucial aspect of financial planning for individuals and businesses alike. In India, the income tax system is progressive, meaning that tax rates increase with higher income levels. The government periodically revises the income tax slabs to reflect economic conditions and policy objectives.
In this article, we’ll guide you through everything you need to know about the income tax slabs for the financial year 2024-25 and assessment year 2025-26.
Also Read-How to File Income Tax Returns (ITR) Online in India?
Understanding Income Tax Slabs.
Income tax slabs in India follow a progressive taxation system, where the tax rate increases as your taxable income increases. The income tax slab rates are different for various categories of individual taxpayers based on their age and residential status.
For the financial year 2024-25, taxpayers have the option to choose between two tax regimes:
- The new tax regime introduced in Budget 2020 with lower tax rates but fewer tax deductions and exemptions.
- The old tax regime with higher tax rates but more tax deductions and exemptions.
It’s important to evaluate which tax regime is more beneficial for you based on your income sources, investments, and eligible deductions.
Income Tax Slabs for FY 2024-25.
The income tax slabs for FY 2024-25 remain unchanged from the previous year, as announced in the interim budget. Taxpayers can choose between the old tax regime, which allows various deductions and exemptions, and the new tax regime, which offers lower tax rates but fewer deductions.
New Tax Regime.
The new tax regime, introduced in Budget 2020 and amended in Budget 2023, simplifies the tax structure by reducing the number of tax slabs and offering lower tax rates. However, it does not allow most of the deductions and exemptions available under the old tax regime.
| Annual Taxable Income (INR) | Tax Rate |
|---|---|
| Up to 3,00,000 | Nil |
| 3,00,001 to 6,00,000 | 5% |
| 6,00,001 to 9,00,000 | 10% |
| 9,00,001 to 12,00,000 | 15% |
| 12,00,001 to 15,00,000 | 20% |
| Above 15,00,000 | 30% |
Old Tax Regime.
The old tax regime allows taxpayers to claim various deductions and exemptions, such as House Rent Allowance (HRA), Leave Travel Allowance (LTA), and deductions under Sections 80C, 80D, and more.
| Annual Taxable Income (INR) | Tax Rate |
|---|---|
| Up to 2,50,000 | Nil |
| 2,50,001 to 5,00,000 | 5% |
| 5,00,001 to 10,00,000 | 20% |
| Above 10,00,000 | 30% |
Special Provisions for Senior Citizens.
The income tax slabs differ for senior citizens (aged 60 to 80 years) and super senior citizens (aged above 80 years) under the old tax regime. These provisions offer higher exemption limits to provide relief to older taxpayers.
Senior Citizens (60 to 80 years).
| Annual Taxable Income (INR) | Tax Rate |
|---|---|
| Up to 3,00,000 | Nil |
| 3,00,001 to 5,00,000 | 5% |
| 5,00,001 to 10,00,000 | 20% |
| Above 10,00,000 | 30% |
Super Senior Citizens (Above 80 years).
| Annual Taxable Income (INR) | Tax Rate |
|---|---|
| Up to 5,00,000 | Nil |
| 5,00,001 to 10,00,000 | 20% |
| Above 10,00,000 | 30% |
Surcharge and Cess.
In addition to the income tax, a surcharge is levied on individuals with higher incomes. The surcharge rates vary based on the income level.
| Annual Income (INR) | Surcharge Rate (Old Regime) | Surcharge Rate (New Regime) |
|---|---|---|
| 50,00,001 to 1,00,00,000 | 10% | 10% |
| 1,00,00,001 to 2,00,00,000 | 15% | 15% |
| 2,00,00,001 to 5,00,00,000 | 25% | 25% |
| Above 5,00,00,000 | 37% | 25% |
A health and education cess of 4% is also levied on the income tax and surcharge.
Rebate Under Section 87A.
Under Section 87A of the Income Tax Act, individuals with a net taxable income of up to INR 5 lakh (old regime) or INR 7 lakh (new regime) are eligible for a rebate. The rebate is the lower of the total tax payable or INR 12,500 (old regime) and INR 25,000 (new regime).
How to Calculate Your Income Tax.
To calculate your income tax liability for FY 2024-25, follow these steps:
- Determine your gross total income from all sources, including salary, business income, capital gains, and other sources.
- Subtract eligible deductions and exemptions from your gross total income to arrive at your taxable income.
- Identify the appropriate tax slab based on your age and taxable income.
- Calculate the basic tax liability by applying the corresponding tax rates to your taxable income.
- Add applicable surcharge and cess to your basic tax liability to determine your total tax liability.
- Subtract any tax deducted at source (TDS), advance tax payments, and self-assessment tax payments from your total tax liability to calculate the remaining tax payable or refund due.
Tax Saving Investments and Deductions.
Under the old tax regime, taxpayers can claim various deductions and exemptions to reduce their taxable income. Some of the popular tax-saving investments and deductions include:
- Section 80C: Investments in Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), National Savings Certificate (NSC), life insurance premiums, and more.
- Section 80D: Health insurance premiums for self, spouse, children, and parents.
- Section 24: Interest on home loan.
- Section 80E: Interest on education loan.
- Section 80G: Donations to eligible charitable organizations.
It’s important to note that most of these deductions and exemptions are not available under the new tax regime.
Examples of Tax Calculation.
Example 1: Individual with an Annual Income of INR 8,00,000
Old Tax Regime:
- Annual Income: INR 8,00,000
- Deductions (e.g., Section 80C, 80D): INR 1,50,000
- Net Taxable Income: INR 6,50,000
| Income Slab (INR) | Tax Rate | Tax Amount (INR) |
|---|---|---|
| Up to 2,50,000 | Nil | 0 |
| 2,50,001 to 5,00,000 | 5% | 12,500 |
| 5,00,001 to 6,50,000 | 20% | 30,000 |
| Total Tax | 42,500 |
Health and Education Cess: 4% = 1,700
Total Tax Payable: 44,200
New Tax Regime:
- Annual Income: INR 8,00,000
- No Deductions Allowed
- Net Taxable Income: INR 8,00,000
| Income Slab (INR) | Tax Rate | Tax Amount (INR) |
|---|---|---|
| Up to 3,00,000 | Nil | 0 |
| 3,00,001 to 6,00,000 | 5% | 15,000 |
| 6,00,001 to 8,00,000 | 10% | 20,000 |
| Total Tax | 35,000 |
Health and Education Cess: 4% = 1,400
Total Tax Payable: 36,400
Example 2: Senior Citizen with an Annual Income of INR 12,00,000.
Old Tax Regime:
- Annual Income: INR 12,00,000
- Deductions (e.g., Section 80C, 80D): INR 1,50,000
- Net Taxable Income: INR 10,50,000
| Income Slab (INR) | Tax Rate | Tax Amount (INR) |
|---|---|---|
| Up to 3,00,000 | Nil | 0 |
| 3,00,001 to 5,00,000 | 5% | 10,000 |
| 5,00,001 to 10,00,000 | 20% | 1,00,000 |
| 10,00,001 to 10,50,000 | 30% | 15,000 |
| Total Tax | 1,25,000 |
Health and Education Cess: 4% = 5,000
Total Tax Payable: 1,30,000
New Tax Regime:
- Annual Income: INR 12,00,000
- No Deductions Allowed
- Net Taxable Income: INR 12,00,000
| Income Slab (INR) | Tax Rate | Tax Amount (INR) |
|---|---|---|
| Up to 3,00,000 | Nil | 0 |
| 3,00,001 to 6,00,000 | 5% | 15,000 |
| 6,00,001 to 9,00,000 | 10% | 30,000 |
| 9,00,001 to 12,00,000 | 15% | 45,000 |
| Total Tax | 90,000 |
Health and Education Cess: 4% = 3,600
Total Tax Payable: 93,600
Choosing Between Old and New Tax Regimes.
The choice between the old and new tax regimes depends on individual financial situations and preferences. Here are some factors to consider:
- Deductions and Exemptions: If you have significant deductions and exemptions, the old tax regime may be more beneficial.
- Simplified Tax Filing: The new tax regime offers a simpler tax filing process with fewer deductions and exemptions.
- Tax Rates: Compare the tax rates under both regimes to determine which one results in a lower tax liability.
Frequently Asked Questions (FAQs).
Q1: Can I switch between the old and new tax regimes every year?
A: Yes, salaried taxpayers can switch between the old and new tax regimes every year. However, individuals with business income can only switch once in a lifetime.
Q2: What is the basic exemption limit under the new tax regime?
A: The basic exemption limit under the new tax regime is INR 3,00,000, irrespective of age.
Q3: Are deductions under Section 80C available in the new tax regime?
A: No, most deductions and exemptions, including those under Section 80C, are not available in the new tax regime.
Q4: What is the rebate under Section 87A in the new tax regime?
A: Under the new tax regime, the rebate under Section 87A is available for individuals with a net taxable income of up to INR 7,00,000. The rebate amount is the lower of the total tax payable or INR 25,000.
Q5: How is the surcharge calculated?
A: The surcharge is calculated as a percentage of the income tax payable. The rates vary based on the income level, with higher rates for higher incomes.
Q6: Is the health and education cess applicable under both tax regimes?
A: Yes, a health and education cess of 4% is applicable on the income tax and surcharge under both the old and new tax regimes.
Summary.
Understanding the income tax slabs and rates for FY 2024-25 is essential for effective tax planning and compliance. By evaluating your income sources, eligible deductions, and the benefits of the old and new tax regimes, you can make an informed decision to minimize your tax liability.
Remember to consult with a tax professional for personalized advice based on your specific financial situation. Contact us for any Consultancy of filling ITR or any other requirments.
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C.K. Gupta
Hello, I am C.K. Gupta Founder of Taxgst.in, a seasoned finance professional with a Master of Commerce degree and over 20 years of experience in accounting and finance. My extensive career has been dedicated to mastering the intricacies of financial management, tax consultancy, and strategic planning. Throughout my professional journey, I have honed my skills in financial analysis, tax planning, and compliance, ensuring that all practices adhere to the latest financial regulations. My expertise also extends to auditing, where I focus on maintaining accuracy and integrity in financial reporting. I am passionate about using my knowledge to provide insightful and reliable financial advice, helping businesses optimize their financial strategies and achieve their economic goals. At Taxgst.in, I aim to share valuable insights that assist our readers in navigating the complex world of taxes and finance with ease.
