In India, income tax is determined based on income tax slabs and rates for the relevant financial year (FY) and assessment year (AY). For this year, the financial year is 2024-25, and the assessment year is 2025-26.
Note - According to the Budget, the New Tax Regime will be considered the default tax regime unless the taxpayer opts for another. However, taxpayers can choose between the new tax regime and the old tax regime.
Income Tax Slab
Individuals must pay income tax according to the slab they fall under, based on their income. Higher income leads to higher tax payments, as individuals with higher earnings are taxed at higher rates.
The slab system was introduced to ensure fairness in the country’s tax structure.
Note - As per the Interim Budget 2024-25, there have been no changes to the income tax slabs. Remember, some changes introduced in Budget 2023 will apply for the financial year 2023-24 (April 1, 2023-March 31, 2024).
Income Tax Slabs Under New Tax Regime for FY 2023-24, FY 2024-25
The tables below present the Revised Income Tax Slabs, under the new tax regime, not the old tax regime.
The table below shows the New Tax Regime slabs and the corresponding tax rates, as announced on 23rd July 2024 in the Union Budget:
|
Total Income |
Rate of Tax |
|
Up to Rs 3 Lakhs |
Nil |
|
From 3,00,001 to 7,00,000 |
5% |
|
From 7,00,001 to 10,00,000 |
10% |
|
From 10,00,001 to 12,00,000 |
15% |
|
From 12,00,001 to 15,00,000 |
20% |
|
Above 15,00,000 |
30% |
These new tax slabs in India were presented in the Budget 2023. The table for the new tax regime slabs:
|
Tax Slab |
Rates |
|
Up to Rs. 3,00,000 |
NIL |
|
Rs. 300,001 to Rs. 6,00,000 |
5% (Tax Rebate u/s 87A) |
|
Rs. 6,00,001 to Rs. 900,000 |
10% (Tax Rebate u/s 87A up to Rs 7 lakh) |
|
Rs. 9,00,001 to Rs. 12,00,000 |
15% |
|
Rs. 12,00,001 to Rs. 1500,000 |
20% |
|
Above Rs. 15,00,000 |
30% |
Updates in the New Tax Regime in Budget 2024
- The tax slabs under the new tax regime have been modified.
- Salaried individuals (under the new tax regime) are set to benefit with an annual tax savings of up to Rs 17,500, as proposed in the recent Union Budget 2024-25.
- Standard Deduction: The standard deduction for salaried individuals is suggested to increase from Rs 50,000 to Rs 75,000.
- Family Pension: The deduction available for family pensioners is proposed to rise from Rs 15,000 to Rs 25,000.
- The government has also increased the deduction cap for employer contributions to the National Pension System (NPS) from 10% to 14%.
- NPS-Vatsalya: A new initiative for contributions by parents or guardians for minors. This plan can be converted into a standard NPS account once the individual turns 18.
Updates in the New Tax Regime in Budget 2023
Below are the key changes announced in the new tax regime income tax slabs for the financial year 2023-24, as per Budget 2023:
- The new tax regime will be the default option. Therefore, unless a taxpayer chooses the old tax regime, their income will be taxed according to the new tax regime's slabs.
- The basic exemption limit in the new tax regime has been raised to Rs 3 lakh from Rs 2.5 lakh.
- A standard deduction of Rs 50,000 has been introduced for salaried individuals and pensioners under the new tax regime.
- Family pensioners can also claim a standard deduction of Rs 15,000 under the new regime.
- The highest surcharge rate has been reduced from 37% to 25% in the new regime.
- The rebate under Section 87A has been increased to Rs 25,000 for taxable income up to Rs 7 lakh, up from Rs 12,500 for taxable income up to Rs 5 lakh.
Income Tax Slabs Under the Old Tax Regime
The following are the income tax slabs under the old tax regime, as per the Income Tax Act, 1961:
|
Old Tax Regime Slabs |
Individuals (Age < 60 years) |
Resident Senior Citizens (Between 60 and 80 years) |
Resident Super Senior Citizens (80 years and older) |
|
Up to Rs 2,50,000 |
Nil |
Nil |
Nil |
|
Rs 2,50,001 to Rs 3,00,000 |
5% |
Nil |
Nil |
|
Rs 3,00,001 to Rs 5,00,000 |
5% |
5% |
Nil |
|
Rs 5,00,001 to Rs 10,00,000 |
20% |
20% |
20% |
|
Above Rs 10,00,000 |
30% |
30% |
30% |
Tax Rates for Domestic Companies
The following income tax rates apply to domestic companies:
|
Particulars |
Existing or Old Regime Tax Rates |
New Regime Tax Rates |
|
Companies that opt for section 115BAB (excluding sections 115BA and 115BAA), are registered on/after October 1, 2019, and begin manufacturing by March 31, 2023 |
- |
15% |
|
Companies that choose section 115BAA and calculate total income without claiming specified deductions, exemptions, incentives, or additional depreciation |
- |
22% |
|
Companies opting for section 115BA, registered on/after March 1, 2016, and engaged in manufacturing without claiming deductions specified in the section |
- |
25% |
|
Companies with a turnover/gross receipts under Rs. 400 crores in the previous year |
25% |
25% |
|
Other Domestic Companies |
30% |
30% |
- Surcharge applicable for companies-
- 7% of Income Tax when total income exceeds Rs 1 crore
- 12% of Income Tax when total income exceeds Rs.10 crores
- 10% of Income Tax for companies that opt for Sections 115BAA and 115BAB
- Health & Education Cess Rate - 4%
Income Tax Rate for Partnership Firms or LLP as per Old/New Regime
Partnership firms or LLPs are taxed at 30%
Note -
- A surcharge of 12% is applied to incomes above Rs 1 crore.
- Health and Education Cess Rate - 4 %
Comparison of Income Tax Slabs under the New Regime - Before and After Budget 2023
The tax slabs for HUF and Individuals are as follows:
|
Slab |
New Tax Regime (Before Budget 2023 - until 31 March 2023) |
New Tax Regime (After Budget 2023 - From 01 April 2023) |
|
Rs. 0 to Rs. 2,50,000 |
NIL |
NIL |
|
Rs. 2,50,000 to Rs. 3,00,000 |
5% |
NIL |
|
Rs. 3,00,000 to Rs. 5,00,000 |
5% |
5% |
|
Rs. 5,00,000 to Rs. 6,00,000 |
10% |
5% |
|
Rs. 6,00,000 to Rs. 7,50,000 |
10% |
10% |
|
Rs. 7,50,000 to Rs. 9,00,000 |
15% |
10% |
|
Rs. 9,00,000 to Rs. 10,00,000 |
15% |
15% |
|
Rs. 10,00,000 to Rs. 12,00,000 |
20% |
15% |
|
Rs. 12,00,000 to Rs. 12,50,000 |
20% |
20% |
|
Rs. 12,50,000 to Rs. 15,00,000 |
25% |
20% |
|
Above Rs. 15,00,000 |
30% |
30% |
Tax Slab Rates for FY 2024-25 (AY 2025-26), New Tax Regime – Why Is an Option Available?
Under the new taxation system, taxpayers are given the choice to select between the following options-
- Pay tax at reduced rates according to the new tax regime, provided they forgo specific exemptions (permissible) and deductions under income tax.
- Continue under the existing tax structure, enabling the taxpayer to benefit from exemptions and deductions, but at the higher tax rates of the old regime.
Criteria for Opting for the New Tax Regime
Taxpayers choosing the new regime must forgo certain deductions and exemptions that are available under the old tax regime.
Below are some of the common exemptions and deductions that are not permitted under the new regime:
- Leave Travel Allowance
- Conveyance allowance
- House Rent Allowance
- Relocation allowance
- Children education allowance
- Professional tax
- Daily employment expenses
- Helper allowance
- Deductions under Chapter VI-A (Sections 80C, 80D, 80E, etc.) (except Section 80CCD(2))
- Standard deduction on salary
- Interest on housing loan (Section 24)
- Other special allowances (Section 10(14))
Common Deductions Permitted Under the New Tax Rate Regime
- Investment in Notified Pension Scheme under Section 80CCD(2)
- Conveyance allowance for commuting to work
- Depreciation under Section 32, excluding additional depreciation
- Deductions for hiring new employees under Section 80JJAA
- Allowances for travel on employment or transfer
- Transport allowance for differently-abled individuals
Related Articles on Income Tax
- Tax in India
- Income Tax Act
- Income Tax Online Payment
- Income Tax Return
- Income Tax Return Filing Due Dates
- TDS – Tax Deducted at Source
Types of Taxable Income in India
Income tax is applicable to individuals, trusts, businesses, and other entities in India. Consequently, there are various forms of income subject to taxation in the country.
Here are the different types of taxable income in India:
-
Business Income
Profits earned from businesses are also considered taxable income. The tax is based on either the actual or presumed income from the business, after permissible deductions have been applied.
Different tax rates apply to business income for individuals and corporations. For individual taxpayers with business income, taxes are calculated according to the tax slabs for FY 2024-25.
-
Salary or Pension
Income from salary, allowances, and pensions is taxable. Tax rates vary based on the age of the individual earning the salary or pension during the fiscal year.
-
Property Income
Income from renting out properties is also taxable. Rent received from properties is treated as part of the taxpayer's income and taxed according to the applicable income tax slab rates for the year.
-
Capital Gains Income
Capital Gains income is generated from selling assets like gold, real estate, mutual funds, stocks, or debentures. This can be classified as either short-term or long-term capital gains, depending on the type of asset and the duration it was held.
-
Winnings from Lotteries, Races, and Other Sources
Winnings from activities like lotteries, horse races, and similar events are taxable in India. However, such income is taxed separately and not included in the standard income tax slab rates.
Comparison Between the Old and New Tax Regimes
The new tax regime was introduced in FY 2020-21 alongside the old tax regime. For FY 2024-25 (AY 2025-26), taxpayers can choose between the two systems.
There are two main differences between the old and new tax systems:
- Firstly, the new tax regime includes more tax slabs with lower rates compared to the old regime. Thus, the tax rates for FY 2024-25 vary depending on whether the taxpayer chooses the new or old system.
- Secondly, the major deductions and exemptions available under the old regime (e.g., Section 80C, Section 80D, etc.) are not available in the new tax regime.
Deductions and exemptions are designed to help taxpayers reduce their tax liabilities through investments, savings, or eligible expenses.
In comparison, the old tax regime offered up to 70 deductions or exemptions to help reduce taxable income and, in turn, income tax liability for the fiscal year.