Income Tax Slabs for FY 2024-25 (Assessment Year 2025-26)

India's tax system follows a progressive tax structure, meaning the tax rate increases with the individual's income. The tax rates are divided into different income slabs for various categories of taxpayers. This system helps ensure that individuals who earn more contribute a larger portion of their income as taxes. These slabs are subject to annual revisions based on the government's fiscal policies, which are announced during the annual budget.

Key Budget Updates for 2025: Income Tax Reforms

In the Union Budget of 2025, the government has introduced significant reforms for individual taxpayers. One of the key highlights is the increase in the Section 87A rebate limit from ₹7 lakh to ₹12 lakh. This change will directly benefit individuals with taxable income up to ₹12 lakh, effectively reducing their tax burden. Alongside this, the standard deduction for salaried individuals has been increased to ₹75,000, making the total income of up to ₹12.75 lakh effectively tax-free.

Tax Regimes: New vs. Old

For the Financial Year 2024-25 (Assessment Year 2025-26), taxpayers have the option to choose between the old tax regime and the new tax regime.

Old Tax Regime:

The old tax regime allows taxpayers to claim various exemptions, deductions, and rebates under sections such as 80C, 80D, HRA, and others, thus reducing their taxable income. However, the tax rates are comparatively higher.

New Tax Regime:

The new tax regime, introduced in 2020, offers lower tax rates but eliminates most exemptions and deductions. This regime is simpler for taxpayers who do not wish to track various deductions or exemptions.

Income Tax Slabs under the New Regime for FY 2024-25 (Assessment Year 2025-26)

Section 87A Rebate and Standard Deduction

The Section 87A tax rebate, available for individuals with taxable income up to ₹12 lakh, has been significantly increased in Budget 2025. The rebate limit has been raised from ₹7 lakh to ₹12 lakh, allowing taxpayers in this income bracket to benefit from a full rebate. Moreover, the government has introduced a standard deduction of ₹75,000 for salaried individuals, further easing the tax burden.

Impact of the Rebate:

• Up to ₹5 lakh: No tax for individuals with a taxable income up to ₹5 lakh, as the rebate applies fully.
• ₹5 lakh to ₹12 lakh: Individuals with a taxable income up to ₹12 lakh will now pay significantly lower taxes or none at all, thanks to the combination of the rebate and standard deduction.

Updated Timeline for Filing ITR (Income Tax Returns)

As part of Budget 2025, the government has extended the time frame for taxpayers to file updated Income Tax Returns (ITR). The window for revising or updating an ITR has been increased from two years to four years, starting from 1 April 2025. This provision allows taxpayers to rectify errors or omissions in their tax returns for up to four years, providing more flexibility in compliance.

Key Features of the Tax Regimes

Old Tax Regime

• Tax Benefits: The old tax regime allows for a wide range of exemptions and deductions. Common tax-saving provisions include:
• Section 80C: Deductions for investments in specified instruments like PPF, EPF, NSC, etc.
• Section 80D: Deductions for premiums on health insurance policies.
• Section 24(b): Deductions for home loan interest.
• HRA (House Rent Allowance): Exemption based on rental payments.
• LTA (Leave Travel Allowance): Exemption for travel expenses within India.
• Higher Tax Rates: The tax slabs under the old regime are more stringent, with higher rates as income rises.
• Eligibility: The old tax regime is more suitable for individuals who can make use of tax-saving instruments to reduce their taxable income.

New Tax Regime

• Simpler Compliance: The new tax regime is simpler since it does not allow deductions or exemptions. There is no need to track various investments, insurance, or housing rent allowances.
• Lower Tax Rates: The new regime offers lower tax rates compared to the old regime but with the trade-off of no deductions.
• No Exemptions: Taxpayers cannot claim deductions under Section 80C, 80D, 24(b), and others.

Comparison of the Old and New Tax Regimes for FY 2024-25

Tax on Capital Gains and Investments

• Long-Term Capital Gains (LTCG): The new tax regime does not impact the taxation of long-term capital gains. The tax rate for LTCG remains the same as per the existing tax laws, i.e., 20% with indexation for assets like equity and property held for more than 36 months.
• Short-Term Capital Gains (STCG): Short-term capital gains are taxed at 15% under both regimes if the asset is sold before the holding period of 36 months (for equity) or 24 months (for property).

Revised Surcharge and Cess

• Surcharge: A surcharge of 10% applies for income above ₹50 lakh but below ₹1 crore, 15% for income above ₹1 crore, and so on, depending on the total taxable income.
• Health and Education Cess: A 4% cess is applicable on the total tax payable, including surcharge.

Income Tax Slabs for Senior Citizens and Super Senior Citizens

For Senior Citizens (Aged 60 to 80)

Income Tax for Non-Residents

Non-resident Indians (NRIs) are also subject to income tax under the Indian tax system. However, the tax rate is typically higher than for resident individuals. For example:

• Income from Foreign Sources: NRIs are taxed on their income earned in India, but income earned abroad is generally exempt.
• TDS on Sale of Property: TDS (Tax Deducted at Source) applies at 20% for NRIs on the sale of immovable property in India.

Conclusion

In conclusion, the choice between the old and new tax regimes depends on the taxpayer’s financial situation. The old tax regime is ideal for those who have substantial tax-saving investments or deductions, while the new regime benefits individuals who do not have significant deductions to claim. With the recent changes in Budget 2025, including the increased Section 87A rebate and higher standard deductions, individuals earning up to ₹12.75 lakh can effectively pay no taxes. Additionally, the extension of the ITR filing window provides greater flexibility in tax compliance.

It is essential for taxpayers to evaluate their income, deductions, and investments to decide which tax regime suits them best. Both regimes offer distinct advantages, and understanding the implications of each will lead to better tax planning and savings.

If you have any further questions or need assistance, feel free to reach out to us at admin@ushmaassociates.com or info@nricaservices.com, or contact us via call/WhatsApp at +91 9910075924.

Stay Updated, Stay Compliant!

Disclaimer: Aim of this article is to give basic knowledge about the topic to people who are not in touch with Indian tax norms. When anybody is dealing with these kinds of cases practically, he shall consider all relevant provisions of all applicable Laws like FEMA/Income Tax/RBI /Companies Act etc.