A financial budget is an annual financial statement presented by the government, detailing the government's expected revenue and expenditures for the upcoming fiscal year. The budget serves as a financial plan for the government, outlining the revenue it hopes to earn from taxes and other sources, as well as the expenses it anticipates incurring for various programs and projects.
For FY 2024-25 (AY 2025-26), the income tax slab in the old and new tax regime remains unchanged.
What is an Income Tax Slab?
An income tax slab is a set of income levels that are taxed at a fixed rate set by the government. The income tax slab system in India determines how much tax an individual must pay based on their taxable income. The government revises the income tax slabs on a regular basis to account for changes in inflation and the cost of living.
The income tax slabs are divided into different categories, such as individual taxpayers, Hindu Undivided Families (HUFs), firms, and companies. Different tax rates apply to different levels of taxable income within each category, with higher rates applied to higher levels of income.
Generally, taxpayers used to make investments and spend on specified financial instruments to reduce their tax liability. However, the new income tax regime provides for few deductions or exemption choices.
A noteworthy point is that the previous income tax regime allowed for 70 deductions or exclusions to bring down one’s taxable income and total income tax liability. Therefore, opting for the old tax regime may prove to be more beneficial for people who can avail of multiple tax deductions and exemptions.
On the other hand, the new tax regime offers higher basic exemptions and tax rebate limits. Therefore, people in lower income brackets will benefit from the new regime. In addition, they do not have to go through complicated tax calculations with the new regime. Taxpayers who have not made specified investments during the financial year may also opt for the new regime.
Also Read: Know about the Various Tax Benefits on Home Loan
*Terms and conditions apply.
New Income Tax Slab for FY 2024 - 2025
According to the Union Budget for 2023, the Income Tax Slabs have undergone changes and the basic income exemption rate has been increased from Rs.2.5 Lakh to Rs.3 Lakh under this new tax regime.
Additionally, the upper limit for the rebate under Section 87A has been raised from Rs.5 Lakh to Rs.7 Lakh. It's important to be informed of the latest changes in the income tax slabs. If you have availed of a Home Loan, you can use our Income Tax Calculator to accurately calculate your tax benefits, along with the income tax payable before and after availing of a housing loan.
New Income Tax Slab Rates for FY 2025-26
| Income Tax Slab | Income Tax Rate (%) |
|---|---|
| Up to Rs.4,00,000 | 0 |
| Rs.4,00,001 - Rs.8,00,000 | 5% |
| Rs.8,00,001 - Rs.12,00,000 | 10% |
| Rs.12,00,001 - Rs.16,00,000 | 15% |
| Rs.16,00,001 - Rs.20,00,000 | 20% |
| Rs.20,00,001 and Rs.24,00,000 | 25% |
| Above Rs.24,00,000 | 30% |
Here are some key updates in the income tax regime as per the Union Budget 2025:
- The income tax slabs have been reduced from six to five.
- The basic exemption limit has been increased from Rs.3 Lakh to Rs.4 Lakh.
- Under the new tax regime, the highest surcharge rate has been reduced from 37% to 25%.
- Surcharge rates are not applicable to income which is taxable under Section 111A (short-term capital gain on shares), Section 112A (long-term capital gain on shares) and Section 115AD (tax on income of foreign institutional investors). 15% will be the highest rate of surcharge for tax payable for these incomes.
- Note that the maximum surcharge rate on taxes payable for capital gain or dividend income mentioned in Section 112 is 15%. 15% is also the maximum surcharge rate applicable to an Association of Persons (AoP) comprising entirely of various companies.
- Note that health and education cess at a 4% rate will get added to one’s income tax liability along with a surcharge in every case.
- A standard deduction of Rs.75,000 is applicable for salaried individuals and pensioners under the new tax regime.
- The tax rebate under Section 87A has been increased, allowing individuals with taxable income up to Rs.12 lakh to avail a rebate of Rs.60,000
New Regime Income Tax Slab Rates for Individual
The income tax slab rates given below are applicable for resident individuals aged less than 60 years, i.e., below 59 years.
Income Tax Slab for Individuals for FY 2025-26:
| Income Level (in Rs.) | Basic (in Rs.) | Surcharge (in Rs.) | Cess (in Rs.) | Tax Liability |
|---|---|---|---|---|
| 2,50,000 | - | - | - | - |
| 3,00,000 | - | - | - | - |
| 5,00,000 | - | - | - | - |
| 6,00,000 | - | - | - | - |
| 7,00,000 | - | - | - | - |
| 7,50,000 | - | - | - | - |
| 9,00,000 | - | - | - | - |
| 10,00,000 | - | - | - | - |
| 12,00,000 | - | - | - | - |
| 12,50,000 | 50,000 | - | 2,000 | 52,000 |
| 15,00,000 | 1,05,000 | - | 4,200 | 1,09,200 |
Things You Must Keep in Mind Before Opting for the New Tax Slab
Here are a few things that you must keep in mind before opting to pay the income tax under the new tax slab 2025-26:
- The new tax regime may affect the exemptions and deductions to which you are entitled. Make certain you understand how the new regime will affect your exemptions and deductions.
- If you are an individual or a member of a Hindu Undivided Family (HUF) and do not have any business income, you can exercise the option on or before for each previous year.
- As a taxpayer, once you select the next tax regime, you cannot switch to another option during the year.
- The new tax regime may affect the exemptions and deductions to which you are entitled. Make certain you understand how the new regime will affect your exemptions and deductions.
- It is important to calculate your tax liability under both the old and new tax regimes to determine which is more beneficial to you as the new tax slab may lead to a decrease or increase in your tax liability.
Conditions for Opting New Tax Regime
To be eligible for the lower income tax rates under the new regime, the following conditions must be met by the individual or HUF's total income:
- No business income is included
- No exemptions or deductions from the Income Tax Act are taken into account
- Losses, including carry forward and depreciation-related losses, are not offset
- Capital losses from the sale of house property cannot be deducted
- No exemptions or deductions for allowances or perquisites from any other law are taken into account
How Income Tax is Calculated for FY 2025-26 Under the New Tax Regime?
| Total Gross Income | Rs.15 Lakh |
|---|---|
| Deductions (80C, 80CCD) | NIL |
| HRA | NIL |
| Travel and Medical Allowance | NIL |
| Taxable Income | Rs.15 Lakh |
| Up to Rs.4 Lakh | NIL |
| Above Rs.4 Lakh - Rs.8 Lakh | Rs.20,000 |
| Above Rs.8 Lakh - Rs.12 Lakh | Rs.40,000 |
| Above Rs.12 Lakh - Rs.15 Lakh | Rs.45,000 |
| Health and Education Cess | Rs.4,200 |
| Total tax that must be paid | Rs.1,09,200 |
Income Tax Slabs and Rates as per Old Tax Regime FY 2025-26
For Individuals Below 60 Years of Age
| Income Tax Slab | Tax Rate |
|---|---|
| Up to Rs.2.5 Lakh | NIL |
| Between Rs.2.5 Lakh and Rs.5 Lakh | 5% of the total income above Rs.2.5 Lakh + 4% Cess |
| Between Rs.5 Lakh and Rs.10 Lakh | 20% of the total income above Rs.5 Lakh + Rs.12,500 + 4% Cess |
| Above Rs.10 Lakh | 30% of the total income above Rs.10 Lakh + Rs.1,12,500 + 4% Cess |
For Individuals between 60-80 Years of Age (Senior Citizen)
| Income Tax Slab | Tax Rate |
|---|---|
| Up to Rs.3 Lakh | NIL |
| Between Rs.3 Lakh and Rs.5 Lakh | 5% of the total income above Rs.3 Lakh + 4% Cess |
| Between Rs.5 Lakh and Rs.10 Lakh | 20% of the total income above Rs.5 Lakh + Rs.10,500 + 4% Cess |
| Above Rs.10 Lakh | 30% of the total income above Rs.10 Lakh + Rs.1,10,000 + 4% Cess |
For Individuals above 80 Years of Age (Super Senior Citizen)
| Income Tax Slab | Income Tax Slab Tax Rate |
|---|---|
| Up to Rs.5 Lakh | NIL |
| Between Rs.5 Lakh and Rs.10 Lakh | 20% of the total income above Rs.5 Lakh + 4% Cess |
| Above Rs.10 Lakh | 30% of the total income above Rs.10 Lakh + Rs.1,00,000 + 4% Cess |
For Domestic Companies
Note that the tax slab for domestic companies depends on turnover as mentioned below:
| Income Tax Slab | Tax Rate |
|---|---|
| The previous year's gross turnover can be no more than Rs.400 Crore | 25% |
| The previous year's gross turnover was more than Rs.400 Crore | 30% |
Comparison of the Income Tax Slab Under New and Old Tax Regime
| Taxable Income | New Regime | Old Regime |
|---|---|---|
| Up to Rs.2.5 Lakh | Exempt | Exempt |
| Above Rs.2.5 Lakh to Rs.4 Lakh | Exempt | 5% |
| Above Rs.4 Lakh to Rs.5 Lakh | 5% | 5% |
| Above Rs.5 Lakh to Rs.8 Lakh | 5% | 20% |
| Above Rs.8 Lakh to Rs.10 Lakh | 10% | 20% |
| Above Rs.10 Lakh to Rs.12 Lakh | 10% | 30% |
| Above Rs.12 Lakh to Rs.16 Lakh | 15% | 30% |
| Above Rs.16 Lakh to Rs.20 Lakh | 20% | 30% |
| Rs.20 Lakh to Rs.24 Lakh | 25% | 30% |
| Above Rs.24 Lakh | 30% | 30% |
Key Differences between the Old and New Tax Regime
You need to know the two differences between India’s income tax regimes to figure out which one is better:
- First, the new income tax regime has more tax slabs with lower tax slab rates than the previous tax regime. This will lead to the income tax slabs of FY 2022-2023 fluctuating depending on whether you select the old or new tax regime.
- Some of the notable deductions and exemptions which were available under the previous tax regime such as Section 80C and Section 80D are no longer available under the new income tax regime.
Generally, taxpayers used to make investments and spend on specified financial instruments to reduce their tax liability. But the new income tax regime provides for few deductions or exemption choices.
A noteworthy point is that the previous income tax regime allowed for 70 deductions or exclusions to bring down one’s taxable income and total income tax liability. Therefore, opting for the old tax regime may prove to be more beneficial for people who can avail of multiple tax deductions and exemptions.
On the other hand, the new tax regime offers higher basic exemptions and tax rebate limits. Therefore, people in lower income brackets will benefit from the new regime. In addition, they do not have to go through complicated tax calculations with the new regime. Taxpayers who have not made specified investments during the financial year may also opt for the new regime.
Also Read: Know about the Various Tax Benefits on Home Loan
*Terms and conditions apply.
Frequently Asked Questions
| Income Tax Slab | Income Tax Rate (%) |
|---|---|
| Between Rs.0 and Rs.4,00,000 | 0 |
| Between Rs.4,00,001 and Rs.8,00,000 | 5% |
| Between Rs.8,00,001 and Rs.12,00,000 | 10% |
| Between Rs.12,00,001 and Rs.16,00,000 | 15% |
| Between Rs.16,00,001 and Rs.20,00,000 | 20% |
| Rs.20,00,001 and Rs.24,00,000 | 25% |
| Above Rs.24,00,000 | 30% |
No, once you choose a tax regime for a financial year, you cannot change it during the same financial year. However, you can opt for a different regime in the next financial year.
In FY 2025-26, individuals under the age of 60 years have a tax-free limit of Rs.4 Lakh.
No, it is not mandatory to opt for the new tax regime for the FY 2025-26. Taxpayers can choose between the old and new tax regimes. The decision to switch or not switch regimes can be made at the start of the fiscal year and is final for the entire year. Before deciding on the best tax regime for one's situation, one should carefully consider income sources, deductions, and exemptions.
No, because the new tax regime has fewer exemptions and deductions, you will be unable to claim deductions under Section 80C if you choose the new tax regime for FY 2025-26. You must choose the old tax regime if you want to claim Section 80C and other deductions.
The Financial Year (FY) is when you obtain income, while the Assessment Year (AY) is when that income is assessed and taxed.
The maximum deduction available under Section 80C for the FY 2024-25 remains at Rs.1.5 Lakh. Taxpayers can avail of this deduction by investing in eligible instruments such as the Public Provident Fund (PPF), Employees' Provident Fund (EPF), and Equity-Linked Savings Scheme (ELSS), among others.
The rebate under Section 87A of the Income Tax Act provides tax relief to individual taxpayers whose total income does not exceed a specified threshold. The tax rebate under Section 87A has been increased from a taxable income limit of Rs.5 Lakh to Rs.7 Lakh. Additionally, the maximum rebate amount has been raised from Rs.12,500 to Rs.25,000
Disclaimer
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