During the Union Budget 2025-26 presentation, Finance Minister Nirmala Sitharaman brought forward substantial income tax reforms to benefit citizens while supporting
economic development. Middle-class taxpayers experience substantial benefits through the tax exemption limit growth from ₹7 lakh to ₹12 lakh, which provides them with better saving opportunities. Since the bare exemption ceiling has been raised from ₹3 lakh to ₹4 lakh, incomes beyond ₹24 lakh will now be liable for taxes at the maximum rate of 30%. The tax reform targets increasing cash reserves while motivating consumer spending and establishing better economic stability.
The progressive tax system ensures that higher-earning individuals contribute more, creating a fair and balanced taxation structure. With these reduced tax burdens, people can manage their financial planning more effectively. Staying updated on such changes is essential, as they impact tax liabilities and investment decisions. Transparent government tax policy updates assist people in making financial decisions. These tax measures should boost economic activity and benefit everyone, from paid professionals to company owners.
New Tax Regime Tax Slabs FY 2024-25
The Indian government streamlined the tax code and helped Union Budget for FY 2024-25 (AY 2025-26) taxpayers:
-
Increased Basic Exemption Limit: Low-income earners now have a ₹4 lakh exemption limit, up from ₹3 lakh.
- Revised Tax Rate: Income over ₹24 lakh now carries a 30% top tax rate, up from ₹15 lakh.
These improvements aim to lower taxes and stabilize finances.
Under the new tax system, the changed income tax slabs look as follows:
| Annual Income (₹) | Tax Rate (%) |
|---|---|
| Up to 4,00,000 | Nil |
| 4,00,001 to 8,00,000 | 5 |
| 8,00,001 to 12,00,000 | 10 |
| 12,00,001 to 16,00,000 | 15 |
| 16,00,001 to 20,00,000 | 20 |
| 20,00,001 to 24,00,000 | 25 |
| Above 24,00,000 | 30 |
The modifications aim to increase the available money for people, who will then spend this money to boost economic performance. People should assess their finances to determine which tax structure offers the most benefits under the new and old systems.
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Old Tax Regime Income Tax Slabs AY 2025-26
Taxpayers can keep their income tax bands and take deductions in the Old Tax Regime for 2024-25 (Assessment Year 2025-26). This tax scheme benefits people with big investments and deductible costs most.
Income Tax Slabs under the Old Regime:
| Annual Income (₹) | 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 |
Key Features of the Old Tax Regime
Deductions, exemptions:
- Deduction of up to ₹1.5 lakh for investments in PPF, EPF, NSC, and life insurance policies under Section 80C.
- Self & family health insurance premium deduction under Section 80D.
- Employees in rented homes are exempt from HRA.
- Standard Deduction: ₹50,000 for paid employees.
- Home Loan Interest: Deduction of up to ₹2 lakh on home loan interest payments.
Exemptions reduce taxable income under the former tax system. To make the optimal financial option, individuals must compare it to the new tax system, which has reduced tax rates but no exemptions.
Comparison of Old New Tax Regimes FY 2024-25
| Criteria | Old Tax Regime | New Tax Regime |
|---|---|---|
| Basic Exemption Limit | ₹2,50,000 | ₹4,00,000 |
| Standard Deduction (Salaried) | ₹50,000 | ₹75,000 |
| Eligibility for Deductions | Available (80C, 80D, HRA, LTA, etc.) | Not available |
| Tax Slabs and Rates | ₹2,50,000 - ₹5,00,000 → 5% ₹5,00,000 - ₹10,00,000 → 20% Above ₹10,00,000 → 30% |
₹4,00,000 - ₹8,00,000 → 5% ₹8,00,000 - ₹12,00,000 → 10% ₹12,00,000 - ₹16,00,000 → 15% ₹16,00,000 - ₹20,00,000 → 20% ₹20,00,000 - ₹24,00,000 → 25% Above ₹24,00,000 → 30% |
Tax Calculation Example: Individual Earning ₹10,00,000 Annually
| Particulars | Old Tax Regime (₹) | New Tax Regime (₹) |
|---|---|---|
| Gross Income | 10,00,000 | 10,00,000 |
| Deductions (80C, 80D, etc.) | 1,75,000 | Not Applicable |
| Taxable Income | 8,25,000 | 10,00,000 |
| Tax on ₹2,50,001 - ₹5,00,000 | 12,500 | 5% on ₹4,00,001 - ₹8,00,000 = 20,000 |
| Tax on ₹5,00,001 - ₹10,00,000 | 65,000 | 10% on ₹8,00,001 - ₹12,00,000 = 20,000 |
| Total Tax Payable | 77,500 | 40,000 |
| After Standard Deduction | 72,500 | 32,500 |
Key Takeaways
- New tax regime lowers rates but eliminates deductions.
- The earlier tax system helps those who use exemptions such as HRA, 80C (₹1.5 lakh), and 80D (₹25,000).
- Whereas the old system had just ₹50,000, the new tax system offers a basic deduction valued at ₹75,000.
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Complete 2024-25 Income Tax Slabs
Different income levels in India pay higher taxes. There are three types of taxpayers:
- People under 60
- Senior citizens (60-79 years)
- Super seniors (80+ years)
Taxpayers can pick the previous deduction method or the new lower rate system without exemptions. This table illustrates both regimes' FY 2024-25 (AY 2025-26) income tax slabs for taxpayer categories.
Income Tax Slabs for Individuals
| Income Range (₹) | Old Tax Regime | New Tax Regime |
|---|---|---|
| Up to ₹2,50,000 | Nil | Nil |
| ₹2,50,001 to ₹5,00,000 | 5% | 5% |
| ₹5,00,001 to ₹7,50,000 | 20% | 10% |
| Above ₹15,00,000 | 30% | 30% |
Income Tax Slab Rate Calculation AY 2025-26 (FY 2024-25) – For New Regime
| Income Slabs | Income Tax Rates |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 to ₹8,00,000 | 5% on income exceeding ₹4,00,000 |
| Above ₹24,00,000 | ₹3,00,000 + 30% on income exceeding ₹24,00,000 |
Income Tax Slab Rate Calculation AY 2024-25 (FY 2023-24) – For New Regime
| Income Slabs | Income Tax Rates |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 to ₹6,00,000 | 5% on income exceeding ₹3,00,000 |
| Above ₹15,00,000 | ₹1,50,000 + 30% on income exceeding ₹15,00,000 |
These aim to boost taxpayer disposable income, boosting spending and economic development. Taxpayers should carefully evaluate these developments for educated tax preparation.
Key Changes in Income Tax FY 2024-25
In 2024–25 the basic exemption level was ₹2,50,000. Low-income people would gain from the AY 2025-26 aim of ₹4,00,000.
Rising from ₹15,00,000 in 2024–25, income beyond ₹24,00,000 is taxed at 30% in 2025–26. Those paying between ₹15,00,000 and ₹24,00,000 pay lesser taxes.
These measures boost taxpayer expenditure, growth, and disposable income. Analysis of these trends can help people plan smart taxes.
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Key Features of New Income Tax Regime FY 2024-25
-
Standard Tax System: Since the new tax system is now the default, taxpayers will be automatically placed under it. Individuals must submit Form 10-IEA with their income tax return to maintain the former tax structure.
-
Revised Basic Exemption Limit: The bare exemption ceiling has been revised to ₹3 lakh for all taxpayers, including seniors.
- Tax Rebate for Low-Income Groups: Individuals earning up to ₹7 lakh yearly are exempt from paying taxes under Section 87A due to a refund. This guarantees that persons in this income category have no tax burden after applying for the rebate.
These changes simplify the tax structure and lower the taxes of lower-middle-income taxpayers. Based on income and exemptions, individuals should assess the changes and choose the best tax system.
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What is Surcharge?
A surcharge is an extra fee on income taxes paid by people and businesses whose income exceeds designated levels. It is meant to raise the tax load on higher-income people. The degree of income determines the surcharge rates:
- People earning more than ₹1 crore but up to ₹2 crore pay a 15% surcharge.
- Those with an income more than ₹50 lakh but not more than ₹1 crore pay a 10% fee.
- Higher surcharges apply to incomes over certain thresholds.
Exemptions and Deductions Not Claimable Under the New Tax Regime
Many typical exemptions and deductions granted in the former regime are not claimable under the new tax system. These consist of:
-
Standard Deduction: ₹50,000 is not available to salaried individuals.
-
HRA Exemptions: House Rent Allowance tax benefits are excluded.
-
Leave Travel Allowance: LTA exemptions are not permitted.
-
Section 80C Deductions: Not claimable are deductions up to ₹1.5 lakh for investments in instruments like life insurance premiums, National Savings Certificate (NSC), and Public Provident Fund (PPF).
-
Section 80D Deductions: Excluded are health insurance premium deductions.
-
Interest on Home Loan (Section 24): There are no deductions for self-occupied or let-out property interest paid.
- Other Allowances: Not allowed are exemptions for allowances such as hostel allowance, children's education allowance, and others.
Taxpayers should carefully evaluate their financial circumstances and question whether the reduced tax rates in the new system exceed the loss of certain exemptions and deductions. Sometimes, the previous tax code might be more advantageous, particularly for those with large investments in tax-saving devices.
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Policy Changes and Announcements
The Bharatiya Nyay Sanhita's principles of justice (Nyay) will guide the government's new Income Tax Bill next week. This approach aims to modernize tax rules and improve taxpayer efficiency.
Reforms to the Tax Deduction at Source (TDS) system will simplify compliance for individuals and corporations.
The finance minister stressed that tax reforms are vital for transparent government and economic progress.
Finance Minister's Office Statement
Key tax policy improvements were noted in a recent Finance Minister's announcement:
- Under the New Tax Regime, income up to ₹12 lakh is tax-free, dramatically raising the tax exemption ceiling.
- The taxation system adjusted its rates and slabs to make them appropriate for all financial brackets.
- The government seeks to decrease tax pressure on the middle-income group, allowing individuals to enhance savings, spending, and investments.
- Salaried persons benefit from a maximum tax relief by increasing their nil tax slab to ₹12.75 lakh combined with a standard deduction of ₹75,000.
How Can Income Up to ₹12 Lakh Be Tax-Free?
The new tax system for FY 2024-25 offers tax savings for people earning up to ₹12 lakh annually through the improved Section 87A refund.
Example: Individual Earning ₹12 Lakh Annually
- Income up to ₹4 lakh → No tax
- Income between ₹4 lakh and ₹8 lakh → ₹20,000 tax
- Income between ₹8 lakh and ₹12 lakh → ₹40,000 tax
- Total tax payable → ₹60,000
The tax liability of ₹60,000 is exempt under Section 87A, so taxpayers owe no final amount.
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More Examples of Tax Savings Under the New Regime
Example 1: Individual Earning ₹15 Lakh Annually
- New Tax Regime Tax Payable → ₹1,40,000
- Old Tax Regime Tax Payable → ₹2,62,500
- Total Tax Saved → ₹1,22,500
Example 2: Individual Earning ₹25 Lakh Annually
- New Tax Regime Tax Payable → ₹4,40,000
- Old Tax Regime Tax Payable → ₹5,62,500
- Total Tax Saved → ₹1,22,500
Another Scenario: Individual Earning ₹18 Lakh Annually
- Income up to ₹4 lakh → No tax
- Income from ₹4 lakh to ₹8 lakh → 5% = ₹20,000
- Income from ₹8 lakh to ₹12 lakh → 10% = ₹40,000
- Income from ₹12 lakh to ₹16 lakh → 15% = ₹60,000
- Income from ₹16 lakh to ₹18 lakh → 20% = ₹40,000
- Total Tax Payable → ₹1,60,000
Key Takeaways:
- Thanks to the refund under Section 87A, those making up to ₹12 lakh under the new tax system pay no tax.
- The new tax slabs lower total tax obligations compared to the previous tax system.
- Tax reductions help those with higher incomes—above ₹15 lakh—by increasing disposable income.
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Does the New Tax Slab Affect Everyone?
The new tax regime is exclusively for those who choose it. Although it is now the default tax system, taxpayers can opt for the old one, especially if they have no business income.
Income Tax Slabs for FY 2024-25 (AY 2025-26) vs. FY 2023-24 (AY 2024-25)
| Annual Taxable Income | New Tax Regime Slabs FY 2024-25 | New Tax Regime Slabs FY 2023-24 |
|---|---|---|
| Up to ₹3,00,000 | Nil | Nil |
| ₹3,00,001 to ₹6,00,000 | 5% on income exceeding ₹3,00,000 | 5% on income exceeding ₹3,00,000 |
| Above ₹15,00,000 | ₹2,00,000 + 30% on income exceeding ₹15,00,000 | ₹2,25,000 + 30% on income exceeding ₹15,00,000 |
Key Takeaways
- The new tax regime remains optional, and individuals can choose the old regime if they have tax-saving deductions.
- The tax-free slab remains up to ₹3 lakh, with incremental tax rates applied beyond this limit.
- Capital gains and corporate incomes do not fall under the slab-based taxation system.
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Frequently Asked Questions (FAQ)
1. What is the 2024 tax regime?
The fiscal year 2024-25 income tax system lowers rates but limits exemptions and deductions. Current taxpayers have two tax regime options, but the new system is the default.
2. What is the income tax slab for FY 2024-25?
- Up to ₹3,00,000: Nil
- ₹3,00,001 to ₹7,00,000: 5%
- ₹7,00,001 to ₹10,00,000: 10%
- ₹10,00,001 to ₹12,00,000: 15%
- ₹12,00,001 to ₹15,00,000: 20%
- Above ₹15,00,000: 30%
3. What is the new income tax slab for 2023-24?
- 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%
4. How is ₹7 lakh income tax-free?
In FY 2025-26, income up to ₹7 lakh is tax-free through a mix of tax slabs and the higher refund under Section 87A.
5. Which is better, the old or new tax regime?
The choice depends on financial needs; the new regime offers lower rates but limited exemptions, while the old regime allows for deductions and exemptions.
6. What is the ₹10 lakh tax slab in the old regime?
In the past, those earning over ₹10 lakh were taxed at 30% of the amount.
7. What was the old tax slab?
- 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%
8. A ₹12 lakh salary zero tax?
With the new tax structure for FY 2025-26, a ₹12 lakh wage is tax-free due to the enhanced refund and standard deduction.
9. What is the 2024-25 standard deduction?
In FY 2024-25, salaried workers and pensioners can claim a ₹75,000 standard deduction under the new tax system.
10. New regime 2024-25 tax savings?
Despite restricted tax deductions, NPS and Agnipath Scheme contributions under 80CCD(2) and 80CCH allow tax savings.
11. What is the ₹10 lakh tax slab in the old regime?
Under the old tax regime for the financial year 2024-25, the tax slabs are:
- Up to ₹2.5 lakh: Nil
- ₹2.5 lakh to ₹5 lakh: 5%
- ₹5 lakh to ₹10 lakh: 20%
- Above ₹10 lakh: 30%
Therefore, if your taxable income is ₹10 lakh, the tax calculation would be:
- First ₹2.5 lakh: No tax
- Next ₹2.5 lakh (₹2.5 lakh to ₹5 lakh) at 5%: ₹12,500
- Remaining ₹5 lakh (₹5 lakh to ₹10 lakh) at 20%: ₹1,00,000
- Total tax: ₹12,500 + ₹1,00,000 = ₹1,12,500
- Additionally, a 4% health and education cess is applicable on the total tax.
12. Is the old tax regime discontinued?
Under current regulations, both the old tax system and the new system exist, allowing taxpayers to select between them based on their financial objectives.
