India's income tax system is progressive, meaning tax rates increase with higher income levels. The income tax slab in India specify the applicable rates for different income brackets and vary based on residential status, age, and type of taxpayer. There are two tax regimes: the new tax regime and the old tax regime. The applicable income tax slabs and rates may change each financial year based on government announcements.
The income tax slab for AY 2024-25 for salaried persons will be as per the announcements in budget 2023. It's always advisable to refer to the official tax guidelines and consult a tax expert to know any recent tax updates.
FM Nirmala Sitharaman has made two announcements for those opting for the new tax regime.
First, the standard deduction for salaried employees is proposed to be increased from Rs 50,000/- to Rs 75,000/-. Similarly, deduction on family pension for pensioners is proposed to be enhanced from Rs 15,000/- to Rs 25,000/-.
Second, in the new tax regime, the tax rate structure is proposed to be revised, as follows:
As a result of these changes, a salaried employee in the new tax regime stands to save up to Rs 17,500/- in income tax.
The taxpayers in India need to pay income tax based on the income tax slab they fall in. The Income tax slab consists of different ranges of income with different income tax rates. As income increases, the tax rates also increase. The tax slab in India was introduced to enable a fair tax system in the country. Based on these income tax slabs, the taxpayer has to finish ITR filing by the income tax return last date. The changes in the income tax slab are done as per the budget announcement. There are three categories under which income tax is divided:-
As per the Union Budget 2024, the tax slab under new tax regime has been revised. These revised slab rates will be applicable from 1April 2025. The income tax slab for AY 2025-26 for salaried person has been revised as follows:-
(Note: There is no change under the tax slabs for old tax regime)
| Range of Income (Rs.) | Tax Rate |
|---|---|
| Up to 3,00,000 | NIL |
| 3,00,000-7,00,000 | 5% |
| 7,00,000-10,00,000 | 10% |
| 10,00,000-12,00,000 | 15% |
| 12,00,000-15,00,000 | 20% |
| Above 15,00,000 | 30% |
| Range of Income (Rs.) | Tax Rate |
|---|---|
| Up to 2,50,000 | Nil |
| 2,50,000-5,00,000 | 5% |
| 5,00,000-10,00,000 | 20% |
| Above 10,00,000 | 30% |
A lot of confusion has arisen after Budget 2023 as it has brought many amendments under the new tax regime. This time, the government focused on a new tax regime, making it more attractive for the taxpayers. But with several deductions, the old tax regime has always been the first choice for taxpayers. Let us talk in detail about both these regimes and check which will suit you best.
The new tax regime slab was introduced in Budget 2020, effective April 1, 2020. The new regime offers lower tax rates for higher incomes than the old tax regime. It allows you to lower your tax liability subject to certain conditions and is optional.
So, If you choose to calculate your taxes using the new tax regime, most of the deductions and exemptions available under the Income Tax Act 1961 would not be available to you.
However, with the Budget 2023 and Budget 2024, the government offered a few key changes in the new tax regime to make it more attractive:-
| Tax Slab for FY 2023-24 | Tax Rate | Tax Slab for FY 2024-25 | Tax Rate |
|---|---|---|---|
| Upto ₹ 3,00,000 | Nil | Upto ₹ 3,00,000 | Nil |
| ₹ 3,00,000 - ₹ 6,00,000 | 5% | ₹ 3,00,000 - ₹ 7,00,000 | 5% |
| ₹ 6,00,000 - ₹ 9,00,000 | 10% | ₹ 7,00,000 - ₹ 10,00,000 | 10% |
| ₹ 9,00,000 - ₹ 12,00,000 | 15% | ₹ 10,00,000 - ₹ 12,00,000 | 15% |
| ₹ 12,00,000 - ₹ 15,00,000 | 20% | ₹ 12,00,000 - ₹ 15,00,000 | 20% |
| Above 15,00,000 | 30% | Above 15,00,000 | 30% |
The old tax regime in India refers to the system of income tax calculation and slabs that existed before the introduction of the new tax regime. In the old tax regime, individuals have the option to claim various tax deductions and exemptions to reduce their taxable income. The Old Tax Regime offers more than 70 deductions and exemptions to claims like Section 80C, HRA, LTA, and more. This regime is also called the existing tax regime. There is no change in old tax regime slab rate.
| Range of Income (Rs.) | Tax Rate |
|---|---|
| Up to 2,50,000 | Nil |
| 2,50,000-5,00,000 | 5% |
| 5,00,000-10,00,000 | 20% |
| Above 10,00,000 | 30% |
Note: The basic exemption limit for individuals above the age of 60 years and below 80 years under the old tax regime is Rs.3,00,000.
The basic exemption limit for individuals above the age of 80 years under the new tax regime is Rs.5,00,000.
If you find ITR filing complicated, you can get assistance from our tax experts and complete your income tax return filing with the help of an online CA.
| Income Tax Slab (Rs.) | Old Tax Regime | New Tax Regime FY 2023-24 (AY 2024-25) |
|---|---|---|
| 0 - 2,50,000 | - | - |
| 2,50,001 - 3,00,000 | 5% | - |
| 3,00,001 - 5,00,000 | 5% | 5% |
| 5,00,001 - 6,00,000 | 20% | 5% |
| 6,00,001 - 7,50,000 | 20% | 10% |
| 7,50,001 - 9,00,000 | 20% | 10% |
| 9,00,001 - 10,00,000 | 20% | 15% |
| 10,00,001 - 12,00,000 | 30% | 15% |
| 12,00,001 - 12,50,000 | 30% | 20% |
| 12,50,001 - 15,00,000 | 30% | 20% |
| More than 15,00,000 | 30% | 30% |
Confused about which tax regime suits you best as per your financial situation? Don’t worry! Book Consultation with our tax experts and let them select the best regime for your needs.
| Income of the assessee (Rs.) | Old Regime |
|---|---|
| 0.0 to 2,50,000 | NIL |
| 2,50,001 to 5,00,000 | 5% |
| 5,00,001 to 10,00,000 | 20% |
| Above 10,00,000 | 30% |
| Domestic Company | NORMAL TAX RATE | |
|---|---|---|
| Assessment Year 2022-23 | Assessment Year 2023-24 | |
| Where its total turnover or gross receipt during the previous year, 2019-20, does not exceed Rs. 400 crore | 25% | NA |
| Where its total turnover or gross receipt during the previous year 2020-21 does not exceed Rs. 400 crore | NA | 25% |
| Any other domestic company | 30% | 30% |
Also, the Government introduced special tax rates for domestic companies under various sections; these can be summarized as:-
| Domestic Company | SPECIAL TAX RATES | |
|---|---|---|
| Assessment Year 2022-23 | Assessment Year 2023-24 | |
| Where it opted for section 115BA | 25% | 25% |
| Where it opted for Section 115BAA | 22% | 22% |
| Where it opted for Section 115BAB | 15% | 15% |
Note:
1. In Addition to basic Income Tax, as discussed above, the following are also to be taken care of:-
- Surcharge: Surcharge is levied on the amount of income tax at the following rates if the total income of an assessee exceeds specified limits:-
| Rs. 1 Crore to 10 Crores | Above Rs. 10 Crore |
| 7% | 12% |
The rate of surcharge in case of a company opting for taxability under Section 115BAA or Section 115BAB shall be flat 10% irrespective of the amount of total income.
- Health & Education Cess @4%
2. MAT Provisions as per section 115JB would also be applicable while calculating tax payable.
| Nature of Income | Tax Rate |
|---|---|
| Royalty received from the Government or an Indian concern in pursuance of an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made after February 29, 1964, but before April 1, 1976, and where such agreement has, in either case, been approved by the Central Government | 50% |
| Any other income | 40% |
| Note: 1. In Addition to basic Income Tax, as discussed above, the following are also to be taken care of:- - Surcharge: A surcharge is levied on the amount of income tax at the following rates if the total income of an assessee exceeds specified limits:- | |
| Rs. 1 Crore to 10 Crores | Above Rs. 10 Crore |
| 2% | 5% |
Resident Individuals are categorized into 3 parts under Income Tax Act-
| Tax Slab | Tax rate |
|---|---|
| Up to Rs. 3,00,000 | Nil |
| 3,00,001 to 5,00,000 | 5% of income over Rs. 3,00,000 |
| 5,00,001 to 10,00,000 | Rs. 10,000 + 20% of income over Rs. 5,00,000 |
| Above 10,00,000 | Rs. 1,10,000 + 30% of income over Rs. 10,00,000 |
| Tax Slab | Tax rate |
|---|---|
| Up to Rs. 5,00,000 | Nil |
| 5,00,001 to 10,00,000 | 20% of income over Rs. 5,00,000 |
| Above 10,00,000 | Rs. 1,00,000 + 30% of income over Rs. 10,00,000 |
In the event that an individual's income exceeds a certain threshold, additional taxes are levied on top of the existing tax rates. This constitutes an extra tax burden primarily targeted at high-income earners.
The surcharge rates are structured as follows:
It's worth noting that in Budget 2023, the highest surcharge rate of 37% was reduced to 25% under the new tax regime, effective from 1st April 2023.
However, certain income sources are exempted from the highest surcharge rates of 25% or 37%. These include income from dividends and capital gains taxable under sections 111A (Short Term Capital Gain on Shares), 112A (Long Term Capital Gain on Shares), and 115AD (Tax on the income of Foreign Institutional Investors). For such incomes, the highest surcharge rate on the tax payable is capped at 15%.
Additionally, the surcharge rate for an Association of Persons (AOP) consisting entirely of companies is also limited to 15%.
Furthermore, an additional Health and Education cess at the rate of 4% is applied to the income tax liability, contributing to government funds designated for healthcare and educational initiatives.
The 2020 budget has removed approximately 70 of the 100 exemptions available under the new regime. The following exemptions and deductions are some of the most important ones that would not be available if the new tax regime slab is chosen for tax calculation –
The following deductions and exemptions would be available under the new tax regime –
The various benefits and disadvantages of old and new tax regimes include
| Benefits | Disadvantages |
|---|---|
| OLD TAX REGIME | |
| Option to avail approx 70 exemptions and deductions under the Income Tax Act | Investment only in specified options was required to claim the tax benefit. |
| Practice in submitting false disclosures for investment proofs is prevalent | |
| NEW TAX REGIME | |
| Tax Rates Reduced | No major tax saving options given, increasing cash flow in the hands of taxpayers |
| Not attractive to those who are already investing and have binding premiums | |
Let's walk through how Pooja, a salaried individual with an annual income of Rs. 8,50,000, calculates her income tax. Pooja has deductions under section 80C amounting to Rs. 1,50,000.
Pooja starts by figuring out her gross taxable income. So, it's Rs. 8,50,000 (her total income) minus Rs. 1,50,000 (deductions), which equals Rs. 7,00,000.
Now, let's dive into the income tax slab. There are three tax slabs in India:
Up to Rs. 5,00,000: 0% tax
Rs. 5,00,001 to Rs. 10,00,000: 20% tax
Above Rs. 10,00,000: 30% tax
Since Pooja's income falls in the Rs. 5,00,001 to Rs. 10,00,000 range, her tax rate is 20%.
Calculating the tax amount involves taking the income in this slab (Rs. 7,00,000 - Rs. 5,00,000) and applying the tax rate (20%). So, Pooja's tax amount within this slab is Rs. 40,000.
Now, surcharge. No worries for Pooja here because the surcharge applies to incomes exceeding Rs. 50 lakhs, and she's below that threshold.
Adding it all up, Pooja's total income tax for the financial year 2023-24 is Rs. 40,000. That's how she figures out her tax liability in a nutshell!
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