Income Tax Slabs FY 2024-25 (AY 2025-26): New Vs Old Regime Rates And Exemptions
Taxes are the primary source of revenue for the government. It can be categorised into two categories: Direct and indirect. While direct taxes are levied on individual income and wealth, indirect taxes are levied on commodities purchased.
A direct tax, known as income tax, is imposed on the funds that a person or corporation makes within a specific fiscal year. This tax is calculated based on tax slabs in India. Income tax slab refers to the system of levying a particular tax rate at a particular income range.
Updates of income tax slabs have historically been a key feature of budget announcements. The Union Budget 2025 brought significant changes to the income tax slabs. The blog explores the new regime tax slabs and makes a comparative analysis of the old and new income tax regimes.
New Income Tax Regime VS. Old Income Regime
The Union Budget 2025 brought significant relief to income taxpayers by exempting income up to INR 12,00,000 in the new tax slab1. Moreover, salaried individuals get a higher exemption for income up to INR 12,75,000, in the new tax regime slabs. The differences between the regimes are given below.
1. Basic Exemption: Income up to INR 12 lakh is exempted from the new tax slabs. For salaried taxpayers, the exemption increases to INR 12,75,000 with standard deduction. The exemption under the old tax scheme varies depending on the age group. For instance, individuals below 60 years of age who have incomes up to INR 2.5 lakh exempted.
2. Tax slabs: The number of tax slabs has increased under the new regime. The tax rates are 0%, 5%, 10%, 15%, 20%, 25% and 30%. Under the previous tax system, the tax slabs varied according to age. The main rates are 5%, 20% and 30%.
3. Age: The calculation of income tax is uniform across age groups in the new tax regime. The calculation of income tax differs with age under the old tax regime.
4. Deductions and exemptions: Deductions and exemptions have become limited due to an increase in basic exemptions and standard deductions in the new system. Under the previous system, taxpayers had access to more exemptions and deductions.
Listed below is the new tax slab and the old tax slab (Below 60 years).
Tax Slab (INR lakh) New Tax Regime | Tax Rate (%) New Tax Regime | Tax Slab (INR lakh) Old Regime | Tax Rate (%) Old Regime |
| 0-4 | Nil | Up to 2.5 | Nil |
| 4-8 | 5 | 2.5-5 | 5 |
| 8-12 | 10 | 5-10 | 20 |
| 12-16 | 15 | Above 10 | 30 |
| 16-20 | 20 | - | - |
| 20-24 | 25 | - | - |
| Above 24 | 30 | - | - |
Eligibility Criteria Under Each Regime
If the taxpayers' income falls above the exemption limit, they will have to pay the tax due as per the income tax slab for AY 2025-262.
The new tax regime has become the default regime. In case an individual wishes to opt for the old tax regime, they would have to explicitly notify their choice.
- For “non-business” income, the choice of regime can be disclosed while filing the ITR on or prior to the due date.
- For income from a business or profession, taxpayers have to furnish Form 10-IEA to opt out of the new tax regime or the old tax regime.
However, for qualified taxpayers with business and professional income, the opportunity to return to the old tax system and withdraw it in any succeeding AY is only accessible once in their lifetime3.
Benefits And Drawbacks Of Old vs New Tax Regime
Both old and new tax regime slabs are designed to suit the needs of Indian taxpayers. However, the advantages of each tax slab can be experienced if chosen after considering their pros and cons.
Advantages:
| New Regime Tax Slab | Old Regime Tax Slab |
1. The new income tax slabs have exempted income up to INR12,00,000 for all and INR12,75,000 in the case of salaried individuals. 2. The tax slabs have been simplified. There is no age-wise categorisation. | 1. Tax rates remain unchanged, giving taxpayers a sense of familiarity. 2. A greater number of exemptions and deductions are available. |
Disadvantages:
| New Regime Tax Slab | Old Regime Tax Slab |
| 1. The deductions and exemptions have been restricted. | 1. The exemption limit is lower than the new tax regime. 2. The tax structure is complex. |
Age-Wise Tax Slab Comparison: New VS Old Regime
This section aims to simplify the income tax slab for AY 2025-26 by providing an age-wise categorisation. The new regime is the same for all ages.
Below 60 Years of Age-
Tax Slab (INR lakh) New Tax Regime | Tax Rate (%) New Tax Regime | Tax Slab (INR lakh) Old Tax Regime | Tax Rate (%) Old Tax Regime |
| 0-4 | Nil | Up to 2.5 | Nil |
| 4-8 | 5 | 2.5-5 | 5 |
| 8-12 | 10 | 5-10 | 20 |
| 12-16 | 15 | Above 10 | 30 |
| 16-20 | 20 | - | - |
| 20-24 | 25 | - | - |
| Above 24 | 30 | - | - |
Income Tax Slabs And Rates For Senior Citizens (Between 60 and 80 Years of Age)
Tax slab (INR lakh) New Tax Regime | Tax rate (%) New Tax Regime | Tax slab (INR lakh) Old Tax Regime | Tax rate (%) Old Tax Regime |
| 0-4 | Nil | Up to 2.5 | Nil |
| 4-8 | 5 | 2.5-3 | Nil |
| 8-12 | 10 | 3-5 | 5 |
| 12-16 | 15 | 5-10 | 20 |
| 16-20 | 20 | Above 10 | 30 |
| 20-24 | 25 | - | - |
| Above 24 | 30 | - | - |
Income Tax Slabs And Rates For Super Senior Citizens (Above 80 Years of Age )
Tax Slab (INR lakh) | Tax rate (%) | Tax slab (INR lakh) | Tax rate (%) |
| 0-4 | Nil | Up to 2.5 | Nil |
| 4-8 | 5 | 2.5-3 | Nil |
| 8-12 | 10 | 3-5 | Nil |
| 12-16 | 15 | 5-10 | 20 |
| 16-20 | 20 | Above 10 | 30 |
| 20-24 | 25 | - | - |
| Above 24 | 30 | - | - |
Source: Income Tax Department4
New Tax Slabs For Companies In FY 25-26
| Condition | Income Tax Rate |
| Gross receipts or total turnover for the preceding year 2020–21 did not surpass INR 400 crores. | 25% |
| Manufacturing companies that chose sec 115BA | 25% |
| Companies that chose sec 115 BAA (applicable to businesses that receive a lower tax rate). | 22% |
| Companies that chose 115BAB (new manufacturing companies) | 15% |
| Any other domestic company | 15% |
Source: Income Tax Department5
Defining Marginal Relief
A tax policy known as "marginal relief" is intended to stop a disproportionate rise in tax obligations when income just slightly surpasses certain levels. It guarantees that taxpayers pay no more taxes than the amount that their income is above the exemption threshold.
Marginal Relief = Extra Tax Due - Overthreshold Income
The illustration below might simplify the concept of marginal relief further.
Suppose Income is INR 12,50,000
- Tax Payable Without Relief as per the new regime: INR 67,500
| Particulars (INR) | Tax liability |
| Up to 4 lakhs (0%) | 0 |
| Next 4 lakhs (5%) | 20,000 |
| Next 4 lakhs (10%) | 40,000 |
| Last 50,000 (15%) | 7,500 |
- Excess Income Over INR12 Lakh: INR 50,000
- Marginal Relief: INR 67,500 - INR 50,000 = INR 17,500
- Final Tax Payable After Relief: INR 50,000
The tax payable without relief (i.e. 67,500) is more than the tax payable after relief (i.e. 50,000). Therefore, marginal relief helps to reduce the tax burden of the taxpayer.
Deductions And Exemptions In New Vs Old Regime
The income tax budget 2025 gave a major relief to the Indian middle class by increasing the exemption limit. This section takes a keen look at this aspect of the budget income tax.
Common Deductions As Per The Old Tax Regime
Some common deductions that applied to the tax slab old regime are listed below.
1. Investment in instruments like Public Provident Fund, Employee Provident Fund, National Savings Certificate, Equity Linked Savings Scheme and life insurance premiums attracted a deduction of up to INR 1.5 lakh under section 80C6.
2. 80D provided deductions applicable on health insurance subject to age categorisation.
3. HRA exemption based on real rent paid, contingent on factors such as city of residence and wage structure
4. 80E provides deductions on interest paid on educational loans with a limit of 8 years or till the interest is paid, whichever is earlier.
Standard Deduction As Per Both Regimes
1. Under the old regime, INR 50,000 is allowed for the salaries of individuals and pensioners as a standard deduction7.
2. Under the new regime, INR 75,000 was allowed for the salaries of individuals and pensioners as a standard deduction, starting in FY 2024-25.
Surcharge On Income Tax
A surcharge is an extra tax levied on income above a certain income threshold. It increases the actual tax payable.
| Taxable income (INR) | New regime | Old regime |
| Up to 50 lakhs | nil | nil |
| 50 lacs- 1 crore | 10% | 10% |
| 1 crore- 2 crore | 15% | 15% |
| 2 crore- 5 crore | 25% | 25% |
| Above 5 crore | 37% | 25% (capped) |
Conclusion
Income tax is the highlight of the financial year. The taxpayers can choose between the old and new regimes. The choice of regime is crucial because it allows taxpayers to save the most on taxation. The new regime tax slab has given significant relief to the middle class. However, the old regime maintains its importance to those who prefer more category-specific deductions rather than an overall rise in basic exemption.
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Read our latest blog on What Is HRA, HRA Exemption, And Calculation?
Frequently Asked Questions On Income Tax Deduction List And Exemption
1. When can I opt for the old vs new regime?
For salaried individuals:
- At the beginning of the financial year: You can choose the preferred regime by informing your employer at the beginning of the financial year. This choice applies for the entire year and cannot be changed midway.
- While filing income tax returns: If you have yet to choose for any income tax regime during the year, you can do that by opting either the old or new regime while filing your income tax return.
For non-salaried individuals (business owners, freelancers, etc.):
- While filing income tax returns: You can choose either the old or new regime while filing your income tax return for that year.
2. What is the limit of 80C and 80D?
The new regime does not allow deductions under 80C and 80D except for certain specific cases like NPS contributions. In the old regime, the 80C was capped at INR 1.5 lakhs, and 80D was capped at INR 75,000. The standard deduction in the new regime increased to 75,000 in the new regime.
3. How is tax calculated on salary?
Income tax calculation is done on total income. Taxpayers have to disclose their income from business or profession, house rent allowance and income from other sources along with salary. In some cases, tax is deducted at the source by the employer while making a payment. While filing an ITR, taxpayers deduct the TDS paid from the total tax liability.
4. Is PF taxable?
The taxability of the Provident Fund depends on the type of contribution and the regime chosen. In the old tax regime, the deduction was applicable up to INR 1.5 lakhs. No deductions are allowed on the provident fund as per the new regime.
References:
1. Summary Of Union Budget 2025-26, accessed from: https://pib.gov.in/PressReleasePage.aspx?PRID=2098352
2. Income Tax Department, accessed from: https://www.incometax.gov.in/iec/foportal/help/new-tax-vs-old-tax-regime-faqs
3. Income Tax Department, accessed from: https://www.incometax.gov.in/iec/foportal/help/individual/return-applicable-1
4. Income Tax Department, accessed from: https://www.incometax.gov.in/iec/foportal/help/individual/return-applicable-1
5. Income Tax Department, accessed from: https://www.incometax.gov.in/iec/foportal/help/company/return-applicable
6. Income Tax Department, accessed from: https://incometaxindia.gov.in/Pages/acts/income-tax-act.aspx
7. Income Tax Department, accessed from: https://www.incometax.gov.in/iec/foportal/help/individual/return-applicable-1
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