New Slabs of Income Tax For Assessment Year 2024-25 And 2025-26

Summary: The Income Tax Act, 1961, initially had uniform tax slabs for different categories of taxpayers. However, the Finance Act, 2020, introduced Section 115BAC, offering individual and HUF taxpayers a choice between new and old tax regimes. The new regime, which disallows deductions under sections like 80C and 80D, faced limited adoption due to these restrictions. The Finance Act, 2023, introduced significant relief under Section 115BAC, raising the minimum taxable limit to ₹3,00,000 and offering a standard deduction of ₹50,000 for salaried taxpayers. Family pensioners can claim a deduction of up to ₹15,000, and the Section 87A rebate increased to ₹25,000. Starting from AY 2025-26, further relief is provided, including an increase in the standard deduction to ₹75,000 for salaried individuals and ₹25,000 for family pensioners. Tax slabs for AY 2024-25 and 2025-26 under the new regime vary, with tax rates starting at 5% for incomes above ₹3,00,000. However, opting for this regime disqualifies taxpayers from several deductions, including house rent allowance (HRA), leave travel concession (LTC), and deductions under Chapter VIA like Section 80C and 80D.

We know that since inception of the Income Tax Act, 1961, there was one slab of tax for different types of tax payers, i.e. Individual and Hindu Undivided Family, Firms, Co-Operative Societies, Private and Public Limited Companies etc.

By Finance Act, 2020, i.e. from 1^st April, 2021 new section 115BCA was introduced, where in for individual and HUF assesse different rate of tax has been introduced and assesse has given an offer to choose the slab as their choice. Once the assesse has choose any slab, he cannot change every year, he has to continue for five years.

This system did not get good response from assesses, because there were certain restrictions like assesse was not entitle to claim deduction of Chapter VIA, interest on housing loan etc., hence mostly assesse are selected old regime.

By Finance Act, 2023, under section 115BCA, relief are provided as under:

• Minimum taxable limit of Rs.2,50,000, increased to Rs.3,00,000
• Salaried assesses and pensioners will get benefit of Rs.50,000 as standard deduction and assesses who get family pension will get up to the limit of Rs.15,000 as 30% of standard deduction.
• Under section 87A benefit of Rs.12,500 increased to Rs.25,000.
• Section 115BAC is declare as default scheme and benefit of this section will be available not only to individual and HUF but also available to Association of Persons (AOP), Body of Individuals (BOI) and Artificial Judicial Person.

From assessment year 2025-26:

Under budget 2024, more relief has been given under this section 115BAC, as under:

• Standard Deduction for salaried person has been increased from Rs.50,000 to Rs.75,000.
• Relief under family pension has been increased from Rs.15,000 to Rs.25,000
• Under section 80CCD(2), contribution by employer which was 14% for Government employees and 10% for other employees are made equal at 14% as deduction.

New Tax Slab under section 115BAC for A.Y. 2024-25:

New Tax Slab under section 115BAC for A.Y. 2025-26:

Under this section, any person Individual or HUF , resident or nonresident will get no deductions from their taxable income as under:

Salary Person:

An assesse who get salary income will not get deduction under following sections,

Section 10(5) pertaining to leave travel concession (LTC),

Section 10(13A) house rent allowance (HRA),

Section 10(14) like children education allowance, hostel allowance and many more allowances,

Section 16 entertainment allowance, tax on employment i.e. Professional Tax,

Section 10(17) daily allowance received by a member of Parliament, or any State Legislature or of any committee thereof. Any constituency allowance received by a member of any State Legislature under any Act or rules made by that State.

Section 10(32) clubbing of minor child income, deduction up to Rs.1,500 not allowed.

Income from House Property:

Under section 24 interest paid on loan taken for construction or purchase of residential house up to Rs.2,00,000

Deduction under chapter VIA:

Under Section 80C, LIC premium, Investment in Public Provident Fund, LIC Mutual Fund, Children Education Fees etc.

Under Section 80D Medical Insurance Premium

Under Section 80E Interest on loan taken for higher education.

In short all deduction available under section 80.

Income from Business or Profession:

Under this head of Gross Total Income, additional depreciation under section 32, Investment in Special Business under section 35AD, 32AD, 33AB, 33ABA, 35(1)(II), 35(1)(IIA), 35(1)(III), 35(2AA) and 35CCC deduction will not available.

Following deductions are available:

Under Section 115BAC, when new rate of tax is selected the following deduction are available.

Under section 16 standard deduction up to Rs. 75,000

Under section 80CCC(2) contribution by employers under NPS

Under section 10(14), transport allowance, conveyance, daily allowance etc, to handicap employees.

Under section 57 Rs.25,000 deduction under family pension .