Income Tax Slabs: FY 2024-25 New & Old Regime Tax Rates

The Income Tax Department allows taxpayers to choose between the two available tax regimes: the Old Tax Regime and the New Tax Regime. These regimes provide distinct tax slabs and offer different benefits, such as deductions and exemptions.

 

Here are the tax slabs for both tax regimes for (AY 2024-25) and FY 2024-25 (AY 2025-26):

 

Old Regime

The old tax regime offers various deductions and exemptions under Section 80D, 80C, and House Rent Allowance (HRA). Here are the tax slabs as per the old tax regime:

When choosing between the two regimes, it is important to understand the tax slabs under the old regime, which offer higher rates but allow various deductions like Section 80C and HRA. In contrast, the new regime provides lower tax rates but does not offer such deductions. Here is a detailed comparison:

The choice between the old and new tax regime depends on the taxpayer and various factors, such as income level, investment profile, and financial goals. Below are some key factors to consider:

 

Tax savings through deductions vs. lower tax rates

• Old Tax Regime: Allows for deductions, such as contributions to the Public Provident Fund (PPF), life insurance premiums, and home loan interest under various sections, primarily Section 80C, 80D, and 24(b) of the Income Tax Act, 1961. These deductions reduce taxable income, potentially lowering overall tax liability.

• New Tax Regime: Offers lower tax rates without the benefit of deductions. This can be more favourable for individuals with minimal investments or those who prefer simplicity in tax filing.

 

Income level

• Old Regime: Individuals with income up to ₹5,00,000 can avail of a rebate under Section 87A, reducing their tax liability to zero.

• New Regime: Individuals with income up to ₹7,00,000 are eligible for a rebate that reduces their tax liability to zero.

 

Investment profile

• Old Regime: Investments in tax-saving tools like tax-saving fixed deposits (FDs), PPF, and National Savings Certificates (NSC) are eligible for deductions under Section 80C (up to ₹1.5 lakh). This makes the old regime attractive for those with substantial investments.

• New Regime: This regime is simpler and does not require investments in tax-saving tools, which could benefit those with fewer investments or those seeking a straightforward tax filing process.

Here are the different scenario applicable for several types of taxpayers:

 

Salaried Individuals

• Old Regime: Salaried individuals claiming HRA, standard deductions, and investing in PPF may benefit from the old regime by maximising deductions based on their income from salary tax slab

• New Regime: For those with minimal deductions, the lower tax rates of the new regime could result in less tax burden and an easier filing process

 

Freelancers or Self-employed

• Old Regime: Freelancers or self-employed individuals claiming deductions, such as those for health insurance premiums under Section 80D of the Income Tax Act of 1961, may choose to opt for the old regime to reduce tax liability

• New Regime: Freelancers who don’t claim significant deductions might benefit from the new regime's simplified filing

 

Business Owners

• Old Regime: Business owners with multiple deductions, such as business-related expenses, may prefer the old regime as these deductions reduce taxable income significantly

• New Regime: Business owners without significant deductions and seeking simpler, lower tax rates may find the new regime more suitable

The Union Budget 2024 introduced several changes, especially to the new tax regime. Some key updates include:

 

Changes in Tax Slabs Under New Regime

• The tax rate for income between ₹3 lakh and ₹7 lakh has been reduced from 10% to 5%

• For income between ₹7 lakh and ₹10 lakh, the tax rate has been reduced from 15% to 10%

 

Standard Deduction Increase

• The standard deduction for salaried employees has been increased from ₹50,000 to ₹75,000​

 

Family Pension Deduction

• Pensioners can now claim a deduction of ₹25,000, up from ₹15,000