BAJAJ BROKING
July 26, 2024
9 mins read
Understanding the applicable income tax slabs and rates is essential for effective tax planning. The government revises these slabs periodically to accommodate economic changes and ensure fair taxation. For the financial year 2025-26 and assessment year 2026-27, taxpayers can choose between the old tax regime, which allows deductions and exemptions, and the new tax regime, which provides lower tax rates but eliminates most deductions. Knowing the applicable tax rates helps individuals and businesses determine their tax liability and make informed financial decisions.
Income tax slabs refer to a structured taxation system where different income brackets are taxed at different rates. This progressive taxation method ensures that individuals with higher incomes pay a higher percentage of their earnings as tax, while those in lower-income brackets have reduced or zero tax liability. The income tax slab system applies to various categories of taxpayers, including individuals, senior citizens, non-residents, Hindu Undivided Families, and businesses. The government updates these slabs regularly, considering factors like inflation, economic growth, and revenue requirements. These tax slabs form the foundation of direct taxation and are crucial for efficient tax collection and financial planning.
The new tax regime was introduced to simplify taxation and reduce tax rates while eliminating exemptions and deductions. The new tax slabs for the financial year 2025-26 aim to provide an alternative to the traditional tax structure. This system offers lower tax rates, but taxpayers must evaluate whether it benefits them more than the old regime.
Under the new regime, income up to ₹2,50,000 remains tax-free. Higher tax rates apply progressively on increasing income brackets. Deductions such as those under Section 80C, house rent allowance, and standard deduction are not available. Taxpayers earning up to ₹7,00,000 receive a rebate under Section 87A, making their effective tax liability zero. The new slabs encourage simplified compliance and lower tax rates, but taxpayers must decide whether giving up deductions is financially beneficial for them.
The new tax regime introduced a simplified structure with lower tax rates but no exemptions. The latest slabs applicable for the financial year 2024-25 are as follows.
Annual income range (₹) | Tax rate (%) |
Up to 2,50,000 | Nil |
2,50,001 - 5,00,000 | 5 |
5,00,001 - 7,50,000 | 10 |
7,50,001 - 10,00,000 | 15 |
10,00,001 - 12,50,000 | 20 |
12,50,001 - 15,00,000 | 25 |
Above 15,00,000 | 30 |
Taxpayers earning up to ₹7,00,000 annually do not pay any tax due to the rebate under Section 87A.
The revised new tax regime slabs bring significant changes to taxation. These changes affect both individuals and businesses opting for the new regime.
Income slabs (₹) | Old regime tax rate (%) | New regime tax rate (%) | Impact |
Up to 2,50,000 | Nil | Nil | No tax for lower-income earners |
2,50,001 - 5,00,000 | 5 | 5 | Rebate available under Section 87A |
5,00,001 - 7,50,000 | 20 | 10 | Lower tax under the new regime |
7,50,001 - 10,00,000 | 20 | 15 | Middle-income taxpayers benefit |
10,00,001 - 12,50,000 | 30 | 20 | Encourages higher earners to shift to the new regime |
12,50,001 - 15,00,000 | 30 | 25 | High-income taxpayers save money |
Above 15,00,000 | 30 | 30 | No change for top earners |
The new regime benefits middle-income taxpayers but removes deductions such as those under Section 80C, 80D, and house rent allowance.
The old tax regime allows taxpayers to claim deductions and exemptions, making it beneficial for those with multiple tax-saving investments. The slabs under the old regime for the financial year 2024-25 are as follows.
Annual income range (₹) | Tax rate (%) |
Up to 2,50,000 | Nil |
2,50,001 - 5,00,000 | 5 |
5,00,001 - 10,00,000 | 20 |
Above 10,00,000 | 30 |
Taxpayers opting for the old regime can claim deductions under Section 80C up to ₹1,50,000, Section 80D for health insurance, home loan interest deductions, and other exemptions.
To help taxpayers choose between the old and new tax regimes, here is a comparison of tax slabs under both.
Income slabs (₹) | Old regime tax rate (%) | New regime tax rate (%) |
Up to 2,50,000 | Nil | Nil |
2,50,001 - 5,00,000 | 5 | 5 |
5,00,001 - 7,50,000 | 20 | 10 |
7,50,001 - 10,00,000 | 20 | 15 |
10,00,001 - 12,50,000 | 30 | 20 |
12,50,001 - 15,00,000 | 30 | 25 |
Above 15,00,000 | 30 | 30 |
While the new regime has lower tax rates, taxpayers cannot claim deductions, which may impact overall savings.
Non-resident individuals are taxed differently than resident taxpayers. The applicable income tax slabs for non-residents for the assessment year 2025-26 are as follows.
Annual income range (₹) | Tax rate (%) |
Up to 2,50,000 | Nil |
2,50,001 - 5,00,000 | 5 |
5,00,001 - 10,00,000 | 20 |
Above 10,00,000 | 30 |
Unlike resident taxpayers, non-residents are not eligible for rebates under Section 87A.
The Union Budget 2025 has introduced the latest tax slabs applicable under the new tax regime for the financial year 2025-26. These revised slabs aim to simplify the tax system while reducing the burden on middle-income taxpayers. Below are the updated slabs for taxpayers opting for the new tax regime.
Annual income range (₹) | Tax rate (%) |
Up to 2,50,000 | Nil |
2,50,001 - 5,00,000 | 5 |
5,00,001 - 7,50,000 | 10 |
7,50,001 - 10,00,000 | 15 |
10,00,001 - 12,50,000 | 20 |
12,50,001 - 15,00,000 | 25 |
Above 15,00,000 | 30 |
Under this tax regime, taxpayers earning up to ₹7,00,000 per annum continue to receive a rebate under Section 87A, making their effective tax liability zero.
The new tax regime offers a simplified structure with lower tax rates but eliminates most exemptions and deductions. Key features include:
A major difference between the old and new tax regimes is the availability of deductions. Below is a comparative analysis of common deductions available under both systems.
Deduction type | Old tax regime | New tax regime |
Standard deduction (₹50,000) | Available | Not available |
Section 80C (PPF, ELSS, NSC, etc.) | Available (₹1,50,000) | Not available |
Section 80D (Health insurance) | Available | Not available |
House rent allowance (HRA) | Available | Not available |
Home loan interest (Section 24) | Available (₹2,00,000) | Not available |
Section 80E (Education loan interest) | Available | Not available |
NPS contributions (Section 80CCD) | Available | Not available |
Taxpayers must evaluate whether the loss of deductions is offset by the lower tax rates under the new regime.
The decision between the old and new tax regimes depends on the taxpayer’s financial situation. Below is a comparative summary.
Factor | Old tax regime | New tax regime |
Tax rates | Higher | Lower |
Deductions allowed | Yes | No |
Standard deduction | ₹50,000 | Not available |
Suitable for high investments in tax-saving options | Yes | No |
Simplicity of filing | Complex | Simple |
Taxpayers who claim multiple deductions may benefit from the old regime, while those who prefer a simpler system with lower tax rates may find the new regime more advantageous.
Taxpayers can choose between the old and new tax regimes based on their preference. The choice depends on income levels, exemptions, and tax planning. The following guidelines apply:
The new tax regime does not allow deductions, but taxpayers can still benefit from lower tax rates. Below is an example of tax savings under the new system.
Annual income (₹) | Old regime tax (₹) | New regime tax (₹) | Savings (₹) |
7,50,000 | 54,600 | 39,000 | 15,600 |
10,00,000 | 1,17,000 | 78,000 | 39,000 |
12,50,000 | 1,95,000 | 1,25,000 | 70,000 |
15,00,000 | 2,73,000 | 1,87,500 | 85,500 |
These savings are significant for those who do not invest heavily in tax-saving instruments.
Taxpayers choosing the new regime should consider different scenarios to determine tax liability. Key points include:
The new regime allows taxpayers to save on taxes even without deductions. By strategically using rebates and lower tax rates, an individual earning up to ₹12,00,000 can minimise tax liability. Key elements include:
By carefully structuring earnings and allowances, taxpayers can reduce taxable income.
The amount of tax payable depends on the selected tax regime and applicable deductions. Below is a breakdown for different salary levels.
Annual salary (₹) | Old regime tax (₹) | New regime tax (₹) |
6,00,000 | 23,400 | 15,600 |
8,00,000 | 62,400 | 46,800 |
10,00,000 | 1,17,000 | 78,000 |
12,00,000 | 1,95,000 | 1,25,000 |
Those without deductions benefit from the new regime, while taxpayers using Section 80C and 80D may save more under the old regime.
The choice between the old and new tax regimes depends on individual financial planning. The new tax regime simplifies tax calculations with lower rates but eliminates exemptions, making it beneficial for those without major deductions. The old regime, on the other hand, is ideal for those investing in tax-saving instruments such as provident funds, health insurance, and home loans. By understanding the tax slabs, deductions, and benefits available under each system, taxpayers can make an informed decision and plan their finances accordingly. Selecting the right tax regime ensures compliance while optimising savings.
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The previous year refers to the financial year in which an individual or business earns income. It runs from 1 April to 31 March. The assessment year is the following year in which the income earned in the previous year is assessed for taxation. For instance, for income earned in FY 2024-25, the assessment year is 2025-26.
Yes, the government has announced tax slabs for the financial year 2024-25. Taxpayers can choose between the old tax regime, which allows deductions and exemptions, and the new tax regime, which offers lower tax rates but removes deductions. The slabs vary based on income levels, and individuals earning up to ₹7,00,000 in the new regime can claim a rebate under Section 87A, making their effective tax liability zero.
The choice between the old and new tax regimes depends on individual financial planning. The old regime is beneficial for those who claim deductions under Sections 80C, 80D, and home loan interest. The new regime offers lower tax rates but eliminates deductions, making it suitable for taxpayers who do not invest in tax-saving instruments. A salaried taxpayer with fewer deductions may find the new regime more beneficial.
The basic exemption limit for individuals under the old tax regime is ₹2,50,000. Senior citizens aged between 60 and 80 years have an exemption limit of ₹3,00,000, while super senior citizens above 80 years have a limit of ₹5,00,000. In the new tax regime, the basic exemption limit remains ₹2,50,000, with a rebate under Section 87A making income up to ₹7,00,000 tax-free.
Under Section 87A, individuals with a total income of up to ₹7,00,000 in the new tax regime can claim a rebate, effectively making their tax liability zero. The rebate amount is ₹25,000. This provision ensures that lower-income individuals do not have to pay income tax. In the old regime, the rebate applies to income up to ₹5,00,000, reducing the tax burden for eligible taxpayers.
Individuals who are resident taxpayers in India and have a total taxable income of up to ₹7,00,000 in the new tax regime are eligible for the rebate under Section 87A. The rebate ensures that they do not have to pay any tax. In the old tax regime, the rebate applies to those earning up to ₹5,00,000, reducing their tax liability to nil.
Yes, under the new tax regime, an individual with an annual income of ₹7,00,000 is eligible for a rebate under Section 87A. This means that even though their taxable income falls within a taxable bracket, the rebate offsets the tax liability, effectively making their total income tax-free. In the old tax regime, this exemption is applicable only for income up to ₹5,00,000.
In the new tax regime, individual taxpayers earning up to ₹7,00,000 have a zero-tax liability due to the rebate under Section 87A. In the old tax regime, this limit is ₹5,00,000. Senior citizens can benefit from a higher exemption limit in the old tax regime, but the new tax regime does not differentiate based on age.
The Union Budget 2024 has maintained the exemption limits from the previous year. Under the new tax regime, the rebate under Section 87A continues to ensure that taxpayers earning up to ₹7,00,000 do not have to pay income tax. There has been no increase in the basic exemption limit or rebate threshold beyond this level.
The deduction limit under Section 80C remains at ₹1,50,000 for FY 2024-25. This applies to tax-saving investments such as Public Provident Fund, Employee Provident Fund, National Savings Certificates, Life Insurance Premiums, and Equity Linked Savings Schemes. However, this benefit is only available under the old tax regime and is not applicable in the new tax regime.
No, deductions under Section 80C are not available in the new tax regime. The government has introduced a lower tax rate system in the new regime, but taxpayers cannot claim exemptions for investments such as provident funds, life insurance, or ELSS funds. Taxpayers who heavily invest in these instruments may benefit more from the old regime.
No, under the new tax regime, deductions under Section 80C are not applicable. Taxpayers who choose the new tax regime must forgo all major deductions, including those for provident funds, life insurance, and housing loan principal repayments. The lower tax rates are meant to compensate for the loss of these deductions.
The standard deduction remains at ₹50,000 for salaried individuals and pensioners under both the old and new tax regimes. The government retained this deduction in Budget 2024 to provide relief to salaried taxpayers, helping them reduce taxable income before computing their final tax liability.
The standard deduction under the new tax regime is ₹50,000 for salaried individuals and pensioners. This means taxpayers can reduce their taxable income by ₹50,000 before calculating their final tax liability. This deduction helps bridge the gap between the old and new tax regimes, making the new regime more appealing.
The amount of tax saved depends on the salary level and the tax regime chosen. Salaried taxpayers who switch to the new tax regime with a lower tax rate can save between ₹15,000 and ₹85,000 annually compared to the old regime, depending on their income bracket. However, this comes at the cost of losing deductions and exemptions.
The exact savings depend on income levels and deductions claimed under the old regime. For example, a taxpayer earning ₹10,00,000 annually may save around ₹39,000 under the new regime. However, taxpayers who claim multiple deductions under the old regime may find that the savings in the new regime are not as significant.
A person earning ₹12,00,000 under the new tax regime will be taxed at lower rates than in the old regime. The lower tax slabs ensure that their overall liability is reduced. Additionally, the standard deduction of ₹50,000 helps lower taxable income. However, they cannot claim tax benefits under Sections 80C, 80D, or home loan interest deductions.
Taxpayers have responded positively to the reduction in tax liability for those earning ₹12,00,000 under the new tax regime. Many see this as a relief, especially for middle-class salaried employees who now benefit from lower rates without requiring investment in tax-saving schemes. However, some taxpayers prefer the old regime as it allows deductions, which may lead to more tax savings for those heavily investing in tax-saving instruments.
Middle-class taxpayers benefit from increased rebates under Section 87A in the new tax regime. Individuals with an annual income of up to ₹7,00,000 effectively pay zero tax due to the rebate. Additionally, the new regime’s lower tax rates on income between ₹7,00,000 and ₹15,00,000 provide significant savings, making taxation more affordable for middle-income earners. However, those who claim deductions in the old regime may see a difference in their net tax savings.
Taxpayers can save ₹17,500 in tax under the new regime due to the standard deduction of ₹50,000 for salaried individuals and pensioners. Under the new tax system, this deduction is applied before computing tax liability, leading to savings of ₹15,000 for those in the 30 percent tax bracket and ₹17,500 for those in the highest slab. This deduction helps bridge the gap between the two regimes.
The new tax regime is more suitable for individuals who do not claim multiple deductions under Sections 80C, 80D, and home loan interest. Salaried employees with fewer investments in tax-saving schemes, self-employed professionals without structured deductions, and those who prefer a simplified tax structure may find the new regime beneficial. However, those with significant deductions should evaluate whether the old regime offers better savings.
The new income tax regime has been designed to provide lower rates and rebates, but it has not been explicitly inflation-adjusted. The basic exemption limit remains at ₹2,50,000, which has not changed in many years. While tax rates have been lowered, taxpayers argue that the threshold for exemptions and rebates should be increased to align with inflation and rising living costs.
Surcharge is an additional tax levied on individuals with higher incomes. It is calculated as a percentage of the income tax payable, based on total income.
Certain incomes are exempt from taxation under the Income-tax Act, including:
The tax treatment for short-term capital gains remains unchanged in Budget 2024. Short-term capital gains on equity shares and equity mutual funds are taxed at 15 percent under Section 111A. Other short-term capital gains are taxed as per individual slab rates. Investors hoped for relief on capital gains tax, but no changes were announced in this budget.
The Budget 2024 continues to offer tax benefits for contributions to the National Pension System under Sections 80CCD(1) and 80CCD(2). Employees can claim a deduction of up to 10 percent of their salary, while self-employed individuals can claim up to 20 percent of their gross income. Additionally, the employer’s contribution to NPS remains exempt up to 14 percent for central government employees and 10 percent for others.
Indian professionals working in multinational companies can benefit from:
The government aims to make tax compliance easier for Indian professionals working globally.
The latest tax changes emphasize lower rates in the new regime while removing deductions. This benefits those who prefer a simpler tax structure but impacts individuals relying on deductions to reduce tax liability. The rebate under Section 87A provides relief to middle-income taxpayers, while higher-income individuals need to assess which regime suits their financial planning. The budget aims for a more transparent and predictable tax system.
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