Income tax slabs for Individuals – FY 2024-25 (New and old tax regime)

Summary: For the financial year 2024-25, individual income tax slabs in India have been revised, with changes aimed at making the new tax regime more appealing. Under the new regime, income up to ₹3 lakh is tax-free, with progressively higher rates up to 30% for incomes above ₹15 lakh. Key changes include a raised standard deduction of ₹75,000 for salaried individuals, an increased family pension deduction, and a higher deduction for employer contributions to the National Pension System (NPS). Additionally, a rebate under section 87A allows effective tax-free income up to ₹7.75 lakh. By contrast, the old tax regime remains unchanged, offering more exemptions and deductions but at higher tax rates. For instance, it permits deductions for voluntary retirement, gratuity, and allowances for conveyance and disabilities. Surcharge and cess rates apply similarly in both regimes, although the highest surcharge rate in the new regime has been capped at 25%. While the new tax regime is the default, individuals with business income can opt for the old regime by filing Form 10-IEA. The decision to choose between regimes depends on individual financial planning needs, with the old regime offering more incentives for savings and the new one offering a simplified tax structure.

Introduction: The Budget, 2024 has introduced significant changes to individual income tax slabs, making the new tax regime more appealing. While the new regime offers fewer deductions and exemptions, its lower slab rates and simplified structure may be advantageous for many taxpayers compared to the old regime.

Revised income tax slabs for FY 2024-25 – Under new regime:

slabrate

*Surcharge and education cess will be applicable in addition to the slab rates.

Key exemptions/deductions available under new regime along with changes (if any) as per Budget 2024:

• In case of salaried Individuals, the standard deduction limit has been enhanced to ₹75,000 from ₹50,000.
• Family pension deduction increased to ₹25,000 from ₹15,000.
• Employer’s NPS contribution deduction u/s 80CCD (2) increased from 10% to 14%.
• Resident individuals can claim rebate u/s 87A of up to ₹ 25,000 and effective tax-free salary income turns out to be ₹7,75,000(Including standard deduction of ₹75,000)
• Exemption on voluntary retirement u/s 10(10C), Gratuity u/s 10(10), Leave encashment u/s 10(10AA) can continue to be availed.
• Deductions on allowances, including daily allowance, conveyance allowance, transport allowance for individuals with disabilities, and compensation for travel expenses on tour or transfer, continue to be available.

Comparison between New Regime Slabs (FY 2023-24 vs. FY 2024-25):

*Surcharge and education cess will be applicable in addition to the slab rates.

Tax slabs under old regime remains unchanged for FY 2024-25 which are specified below:

*Surcharge and education cess will be applicable in addition to the slab rates.

Key points under Old tax regime:

• New tax regime is the default tax regime for FY 2023-24 and onwards, to file return under old regime an additional form called Form 10 – IEA to be filed provided individual is having business income.
• Resident individuals can claim rebate u/s 87A of up to ₹ 12,500 and effective tax-free salary income turns out to be ₹5,50,000(Including standard deduction of ₹50,000)
• The income tax exemption limit of up to ₹ 2,50,000 is available only for Individuals, HUF’s below 60 years aged and non-resident Individuals.
• The exemption and deduction benefits can continue to be claimed in the tax return.

Surcharge rates are specified below:

Additionally, health and education cess at 4% is levied on tax and surcharge.

Conclusion: Both the tax regimes have its own pro and cons; The old tax regime favors savings with various deductions, while the new regime offers simplicity and lower rates. Accordingly, an individual must mindfully plan their savings and expenditure and take a suitable call towards which regime is more beneficial.