Income Tax Slabs FY 2023-24, 2024-25 | AY 2024-25 (New & Old Tax Regime)

In India, income tax is calculated using income tax slabs and rates for the applicable financial year (FY) and assessment year (AY). For this year, the financial year will be 2024-25, and the assessment year will be 2025-26.

Note - As per the Budget, the New Tax Regime will be considered as the default tax regime if the taxpayer has not opted for any. But taxpayers can choose either the new tax regime or the old tax regime.

Income Tax Slab

Individual taxpayers must pay income tax based on the slab system into which they fall. Individuals may fall into a different tax bracket depending on their Income. As a result, persons with higher incomes will have to pay more taxes.

The slab system was implemented to keep the country's tax system equitable. 

Note - As per the Interim Budget 2024-25, no changes have been made to the income tax slabs. Remember, a few changes that were announced in Budget 2023 will be applicable on the FY 2023-24 (April 1, 2023-March 31, 2024).

Income Tax Slabs Under New Tax Regime for FY 2023-24, FY 2024-25

The following tables show the Revised Income Tax Slabs, not the old tax regime.

The following table illustrates the New Tax Regime slabs with tax rates as announced on 23rd July 2024, in Union Budget-

These new tax slabs in India were presented in the Budget 2023. The table for the new tax regime slabs-

Changes Announced in the New Tax Regime in Budget 2024

• The slab rates in the new tax regime have been changed.
• Salaried employees (under the new tax regime) will save up to Rs 17,500 annually in taxes as per the changes proposed in the recent Union Budget 2024-25.
• Standard Deduction: The standard deduction for salaried employees is proposed to be increased from Rs 50,000 to Rs 75,000.
• Family Pension: Deduction on family pension for pensioners is proposed to be increased from Rs 15,000 to Rs 25,000.
• The government raised the deduction limit for employers' contributions to the National Pension System (NPS) from 10% to 14%.
• NPS-Vatsalya: It is a soon-to-be started plan for contribution by parents and guardians for minors. On attaining the age of majority, the plan can be converted into a normal NPS account.

Changes Announced in the New Tax Regime in Budget 2023

Listed below are the changes announced in the new tax regime income tax slabs in Budget 2023 for the financial year 2023-24:

• The new income tax regime will be the default tax regime. This means that unless and until an individual explicitly chooses the old tax regime, the person’s income will be taxed as per the new tax regime's slabs.
• The basic exemption limit was hiked to Rs 3 lakh from Rs 2.5 lakh in the new tax regime slabs.
• A standard deduction of Rs 50,000 was introduced under the new regime for salaried and individuals who get pensions.
• Under the new regime, family pensioners can also claim a standard deduction of Rs 15,000
• The highest surcharge rate of 37% reduced to 25% in the new regime
• Rebate under Section 87A increased to taxable income of Rs 7 lakh (tax rebate of 25,000) from 5 lakh (tax rebate of Rs 12,500)

Income Tax Slabs Under Old Tax Regime

Here are the income tax slabs under the old tax regime of the Income Tax Act, 1961-

Tax Slabs for Domestic Companies

The income tax slabs for domestic companies are as follows-

• Surcharge applicable for companies-
  
  
• 7% of Income tax where total income is more than Rs 1 crore
  
• 12% of Income tax where total income is more than Rs.10 crores
  
• 10% of income tax where domestic company opted Section 115BAA and 115BAB
  

• Additional Health & Education Cess Rate - 4%
  

Income Tax Rate for Partnership Firm or LLP as Per Old/New Regime

A partnership firm or an LLP is taxable at 30%

Note -

• A Surcharge of 12% is levied on incomes above Rs 1 crore.
• Health and Education Cess Rate - 4 %
  

Comparison of Income Tax Slabs under New Regime - Before and After the Budget 2023

The HUF and Individual tax slab applicable are-

Tax Slab Rate for FY 2024-25 (AY 2025-26), New Tax Regime – Why an Option to Choose is Given?

Under the new regime of taxation, the taxpayers can avail of an option to opt for one of the following-

• To pay tax at lower rates according to the New regime of taxation on the condition that they refrain from specific exemptions (permissible) and deductions under income tax.
• To continue paying the taxes under the existing income tax rates. The taxpayer can avail of exemptions and rebates by opting into the old regime and paying tax at the existing higher rate.

Conditions for Opting for the New Tax Regime

The taxpayers who have opted for the new regime will tend to forbear some deductions and exemptions that are available in the old regime of taxation.

Some of the common deductions & exemptions not allowed under the new regime are-

• Leave Travel Allowance
• Conveyance allowance
• House Rent Allowance
• Relocation allowance
• Children education allowance
• Professional tax
• Daily expenses in the course of employment
• Helper allowance
• Deduction under Chapter VI-A deduction (80C,80D, 80E etc.) (Except Section 80CCD(2))
• Standard deduction on salary
• Interest on housing loan (Section 24)
• Other special allowances (Section 10(14))

Common Deductions that are Allowed under New Tax Rate Regime

• Investment in Notified Pension Scheme under section 80CCD(2)
• Conveyance allowance for expenditure incurred for travelling to work
• Depreciation under Section 32, except additional depreciation
• Deduction for employment of new employees under section 80JJAA
• Any allowance for travelling for employment or on transfer
• Transport allowance for specially-abled people

Articles Related to Income tax

• Tax in India
• Income Tax Act
• Income Tax Online Payment
• Income Tax Return
• Income Tax Returns Filing Due Date
• TDS - Tax Deducted at Source

Kinds of Taxable Income Sources in India

Individuals, trusts, businesses, and other entities are all subject to income tax. As a result, there are numerous forms of income that can be taxed in India.

Mentioned below are some of the different types of taxable income in India-

• Business Income
  

Profits earned by businesses are also counted as taxable income. The tax in this category is derived from the presumed or real income that the profession or business may generate. However, it is only done once the permitted deductions have been adjusted.

Different rates apply to individual and corporate business income. Individuals with business income will be taxed in accordance with tax slabs and rates for the fiscal year 2024-25.

• Salary or Pension
  

Taxes are frequently levied on the base salary, allowances, and salary profit in this category. The tax slab also applies to an individual's pension after retirement. The tax slabs rates differ based on the age of the individual earning a salary or pension during the fiscal year.

• Property Income
  

Owning many houses and renting them out is an easy method to supplement your income. In such circumstances, however, revenue from house renting is recognized as part of the taxpayer's income. As a result, this income is taxable at the income tax slab rates for the fiscal year.

• Capital Gains Income
  

Capital Gains income can be generated by selling assets such as gold, real estate, mutual funds units, stocks, debentures, and so on. It can be characterized as a long-term or short-term capital gain depending on the type of asset and the earnings produced on it over time.

• Lottery, Races, and More Income
  

In India, winnings from lotteries, horse races, and other similar activities are taxable. However, under current tax legislation, these profits are taxed separately rather than as part of the income slab rates for the fiscal year.

Distinction Between the Old Regime and the New Regime

In the fiscal year 2020-21, a new tax regime was implemented in addition to the existing old tax regime. Taxpayers in FY 2024-25 (AY 2025-26) can select between these income tax regimes and pay tax appropriately.

There are two significant distinctions between India's two income tax regimes:

• To begin with, the new regime of taxation has more tax slabs with lower tax rates than the old regime tax slab. As a result, the tax slabs for FY 2024-25 fluctuate depending on whether you choose the new or old tax regime.
  
  
• Second, all of the important deductions and exemptions available under the previous tax regime, such as Section 80C, Section 80D, and so on, are no longer available if you choose the new regime of taxation.

Tax deductions and exclusions enable taxpayers to decrease their tax liability by investing, saving, or spending on specified financial instruments.

In comparison, the previous tax scheme allowed for up to 70 deductions or exclusions to reduce your taxable income and income tax liability in the fiscal year.

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