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.
2025 Expectations on Tax Slabs
The Government is expected to revise the tax slabs under the new regime to provide relief for the taxpayers and increase their disposable income. The expected revision to the tax slabs is as follows:
- Increase in Basic Exemption Limit: There is an expectation that the basic exemption limit may be raised from Rs. 3 lakhs to around Rs. 5 lakhs. This change is intended to boost disposable income for taxpayers and encourage consumer spending.
- Revision of Tax Slabs for Higher Incomes: It is proposed that the threshold for the 30% tax slab, currently set at Rs. 15 lakhs, could be increased to Rs. 18 lakhs or even Rs. 20 lakhs.
- Introduction of New Tax Slab: A proposal also suggests introducing a 25% tax slab for income between Rs. 15 lakhs and Rs. 20 lakhs.
What is Income Tax Slab?
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 due 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:-
- Individuals who are less than 60 years
- Senior citizens with age of 60 to 80 years
- Super senior citizens with an age of above 80 years.
The direct tax structure of India is also divided into the old and the new regime. The taxpayers can choose the one that is more beneficial while filing their ITR.
Income Tax Slab FY 2024-25 (AY 2025-26)
New Regime (FY 2024-25)
| 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% |
Old Regime (FY 2024-25)
| 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% |
Old vs New Tax Regime Slabs Comparison for FY 2024-25 (AY 2025-26)
ax Slabs | Old Tax Regime | New Tax Regime |
Up to Rs 2,50,000 | NIL | NIL |
Rs 2,50,001 – Rs 3,00,000 | 5% | NIL |
Rs 3,00,001 – Rs 5,00,000 | 5% | 5% |
Rs 5,00,001 – Rs 6,00,000 | 20% | 5% |
Rs 6,00,001 – Rs 7,00,000 | 20% | 5% |
Rs 7,00,001 – Rs 9,00,000 | 20% | 10% |
Rs 9,00,001 – Rs 10,00,000 | 20% | 10% |
Rs 10,00,001 – Rs 12,00,000 | 30% | 15% |
Rs 12,00,001 – Rs 12,50,000 | 30% | 20% |
Rs 12,50,001 – Rs 15,00,000 | 30% | 20% |
Rs 15,00,000 and above | 30% | 30% |
Revised Income Tax Slab Rate Calculation for AY 2025-26 (FY 2024-25) – For New Regime
Income Slabs | Income Tax Rates |
Up to Rs 3,00,000 | Nil |
Rs 3,00,000 to Rs 7,00,000 | 5% on income which exceeds Rs 3,00,000 |
Rs 7,00,000 to Rs 10,00,000 | Rs. 20,000 + 10% on income more than Rs 7,00,000 |
Rs 10,00,000 to Rs 12,00,000 | Rs. 50,000 + 15% on income more than Rs 10,00,000 |
Rs 12,00,000 to Rs 1500,000 | Rs. 80,000 + 20% on income more than Rs 12,00,000 |
Above Rs 15,00,000 | Rs. 1,40,000 + 30% on income more than Rs 15,00,000 |
New Income Tax Regime FY 2024-25 Key Features
- Default tax regime: It is the default tax regime. If individuals want to choose the old regime then they have to file Form 10-IEA.
- Basic exemption limit: The basic exemption limit is Rs. 3 lakhs for everyone irrespective of their age.
- Rebate u/s 87A: Rebate u/s 87A is available to the individual taxpayers if their income is upto Rs. 7 lakhs. Hence, they will have zero tax liability if their income is under Rs. 7 lakhs.
- Surcharge: The highest surcharge rate is 25% under the new regime as opposed to 37% in the old regime.
What Is Surcharge Amount Under Revised New Tax Regime?
Under the revised new tax regime, the surcharge rate has been reduced from 37% to 25% for taxpayers earning income more than Rs 5 crores.
A surcharge is levied on the amount of income tax at the following rates if the total income of an assessee exceeds specified limits
| Net Taxable Income limit | Surcharge Rate on the amount of income tax | |
|---|---|---|
| Before Budget 2023 | After Budget 2023 | |
| Less than ₹50 lakhs | Nil | Nil |
| More than ₹50 lakhs ≤ ₹ 1 Crore | 10% | 10% |
| More than ₹ 1 Crore ≤ ₹ 2 Crore | 15% | 15% |
| More than ₹ 2 Crore ≤ ₹ 5 Crore | 25% | 25% |
| More than ₹ 5 Crore | 37% | 25% |
Income Tax Rate for Non-Resident Individual
| Existing tax regime | New tax regime | ||
|---|---|---|---|
| Level of income (₹) | Rate of tax | Level of income (₹) | Rate of tax |
| 0 – 2,50,000 | Nil | 0 – 3,00,000 | Nil |
| 2,50,001 – 5,00,000 | 5% | 3,00,001 – 7,00,000 | 5% |
| 5,00,001 – 10,00,000 | ₹12,500 + 20% of the amount exceeding ₹5,00,000 | 7,00,001 – 10,00,000 | ₹20,000 + 10% of the amount exceeding ₹7,00,000 |
| 10,00,001 and above | ₹1,12,500 + 30% of the amount exceeding ₹10,00,000 | 10,00,001 – 12,00,000 | ₹50,000 + 15% of the amount exceeding ₹10,00,000 |
| 12,00,001 – 15,00,000 | ₹80,000 + 20% of the amount exceeding ₹12,00,000 | ||
| 15,00,001 and above | ₹1,40,000 + 30% of the amount exceeding ₹15,00,000 | ||
| Note: Surcharge & cess are also applicable here, as in the case of the resident. | |||
Income Tax Rate for AOP/BOI/Artificial Judicial Person
| 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% |
Tax Slabs for Domestic Company
| Condition | Income Tax Rate (excluding surcharge and cess) |
|---|---|
| Total Turnover or Gross Receipts during the previous year 2020-21 does not exceed ₹ 400 crores | 25% |
| If opted for Section 115BA | 25% |
| If opted for Section 115BAA | 22% |
| If opted for Section 115BAB | 15% |
| Any other Domestic Company | 30% |
Note:
- A Company shall be liable to pay Minimum Alternate Tax (MAT) at 15% of book profit (plus surcharge and Health and Education cess as applicable) where the normal tax liability of the Company is less than 15% of book profit.
- A Company, being a unit of an International Financial Services Centre and deriving its income solely in convertible foreign exchange, MAT shall be payable at 9% (plus cess and surcharge as applicable)
- A Company opting for special rate taxation under Section 115BAA and 115BAB are exempt from paying MAT.
- The Companies opting for special rate of taxation u/s 115BAA or 115BAB will not be allowed certain deductions like section 80IA, 80IAB, 80IAC, 80IB and so on, except deduction u/s 80JJAA and 80M.
Income Tax Rate for a Foreign Company
Assessment Year 2024-25
| Nature of Income | Tax Rate |
|---|---|
| Royalty received from 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% |
Assessment Year 2025-26
| Nature of Income | Tax Rate |
|---|---|
| Royalty received from 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 | 35% |
Add:
(a) Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 2% of such tax, where total income exceeds one crore rupees but not exceeding ten crore rupees and at the rate of 5% of such tax, where total income exceeds ten crore rupees. However, the surcharge shall be subject to marginal relief, which shall be as under:
- (i) Where income exceeds one crore rupees but not exceeding ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees.
- (ii) Where income exceeds ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of ten crore rupees by more than the amount of income that exceeds ten crore rupees.
(b) Health and Education Cess : The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of four percent of such income-tax and surcharge.
Minimum Alternate Tax (MAT)
A foreign company is liable to pay Minimum Alternate Tax where tax payable by it, on total income computed as per normal provisions of the Act, is less than 15% of ‘book profit’. In such a case the ‘book profit’ is taken as the income of the company and it shall be liable to pay tax at the rate of 15% of such ‘book profit’.
However, the provisions of MAT do not apply in case of foreign companies if it does not have permanent establishment (PE) in India or opts for presumptive taxation scheme of Section 44B, Section 44BB, Section 44BBA or Section 44BBB.
Income Tax Slab for Senior and Super Senior Citizen (New Tax Regime)
| Income Tax Slabs | Tax Rate |
|---|---|
| Up to Rs.3,00,000 | None |
| Rs.3,00,001 to Rs.7,00,000 | 5% |
| Rs.7,00,001 to Rs.10,00,000 | 10% |
| Rs.10,00,001 to Rs.12,00,000 | 15% |
| Rs.12,00,001 to Rs.15,00,000 | 20% |
| Above Rs.15,00,000 | 30% |
- Income tax exemption limit is up to Rs.3 lakh.
- Surcharge is applicable if total income is more than Rs.50 lakh and up to Rs.1 crore: 10% of income tax.
- Surcharge is applicable if total income exceeds Rs.1 crore: 15% of income tax.
Income Tax Slab for Senior Citizens (Old Tax Regime)
| Income Slab | Income Tax Rate |
|---|---|
| Up to Rs. 3,00,000 | Nil |
| 3,00,001 to 5,00,000 | 5% |
| 5,00,001 to 10,00,000 | 20% |
| Above 10,00,000 | 30% |
Income Tax Slab for Super Senior Citizens (Old Tax Regime)
| Income Slab | Income Tax Rate |
|---|---|
| Up to Rs. 5,00,000 | Nil |
| 5,00,001 to 10,00,000 | 20% |
| Above 10,00,000 | 30% |
Exemptions and Deductions Not Claimable under the New Tax Regime
The following are some of the major deductions and exemptions you cannot claim under the new tax regime:
- The deduction under Section 80TTA/80TTB
- Professional tax and entertainment allowance on salaries
- Leave Travel Allowance (LTA)
- House Rent Allowance (HRA)
- Allowances to MPs/MLAs
- Minor child income allowance
- Helper allowance
- Children education allowance
- Other special allowances [Section 10(14)]
- Additional depreciation under section 32(1)(iia)
- Deductions under section 32AD, 33AB, 33ABA
- Various deductions for donation for or expenditure on scientific research contained in section 35(2AA) or 35(1)(ii) or (iia) or (iii)
- Deduction under section 35AD or section 35CCC
- Interest on housing loan on the self-occupied property or vacant property (Section 24)
- Chapter VI-A deduction (Section 80C, 80D, 80E and so on, except Section 80CCD(2) and Section 80JJAA)
- Exemption or deduction for any other perquisites or allowances including food allowance of Rs 50/meal subject to 2 meals a day
- Employee’s (own) contribution to NPS
- Donation to Political party/trust etc
Surcharge on Income Tax
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:
- 10% of Income tax if total income is greater than Rs.50 lakh but less than Rs.1 crore.
- 15% of Income tax if total income is greater than Rs.1 crore but less than Rs.2 crore.
- 25% of Income tax if total income is greater than Rs.2 crore but less than Rs.5 crore.
- 37% of Income tax if total income exceeds Rs.5 crore.
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.
What are the Exemptions and Deductions Available Under the New Regime?
Under the New tax regime, you can claim tax exemption for the following:
- Transport allowances in case of a specially-abled person.
- Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment.
- Any compensation received to meet the cost of travel on tour or transfer.
- Daily allowance received to meet the ordinary regular charges or expenditure you incur on account of absence from his regular place of duty.
- Perquisites for official purposes
- Exemption on voluntary retirement 10(10C), gratuity u/s 10(10) and Leave encashment u/s 10(10AA)
- Interest on Home Loan on let-out property (Section 24)
- Gifts up to Rs 50,000
- Deduction for employer’s contribution to NPS account [Section 80CCD(2)]
- Deduction for additional employee cost (Section 80JJA)
- Budget 2023 introduced a standard deduction of Rs 50,000 under New Tax Regime applicable from FY 2023-24. This has been increased to Rs.75,000 in Budget 2024 applicable from FY 2024-25
- Budget 2023 also introduced deduction under Section 57(iia) of family pension income
- Budget 2023 further introduced deduction of amount paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2)
- In Budget 2024 Limit of maximum Deduction under Family Pension has been increased from Rs. 15,000 to Rs. 25,000.
- The deduction on employers contribution to pension Scheme as per Section 80CCD (2) has been increased from 10% of salary to the 14% of salary in Budget 2024.
Old Tax Regime Vs New Tax Regime - Which is Better?
The new tax regime can largely benefit middle-class taxpayers who have a taxable income of up to Rs 15 lakh. The old regime is a better option for high-income earners.
The new income tax regime is beneficial for people who make low investments. As the new regime offers six lower-income tax slabs, anyone paying taxes without claiming tax deductions can benefit from paying a lower rate of tax under the new tax regime. For instance, the assessee having total income before deduction up to Rs 12 lakh will have higher tax liability under the old system if they have investments less than Rs. 3,12,500. Therefore, if you invest less in tax-saving schemes, go for the new regime.
That being said, if you already have in place a financial plan for wealth creation by making investments in tax-saving instruments; medical claims and life insurance; making payments of children’s tuition fees; payment of EMIs on education loan; buying a house with a home loan; and so on, the old regime helps you with higher tax deductions and lower tax outgo.
In light of the above and considering the new income tax regime, if taxpayers want to opt for the concessional tax rates, they may evaluate both regimes. Hence, it is advisable to do a comparative evaluation and analysis under both regimes and then choose the most beneficial one, as it may vary from person to person
Old Tax Regime Features
Higher Tax Rates:
- Tax slabs have higher rates for various income ranges.
Deductions and Exemptions:
- Allows multiple deductions such as:
- Section 80C (₹1.5 lakh for investments like ELSS, PPF, etc.)
- Section 80D (Medical insurance premium)
- Standard deduction (₹50,000 for salaried individuals)
- House Rent Allowance (HRA) and Leave Travel Allowance (LTA)
- Exemptions for allowances like transport allowance and food coupons. Suitable for those with high eligible deductions and exemptions.
New Tax Regime Features
Lower Tax Rates:
- Offers reduced tax rates across various slabs:
- Rs. 0 to Rs. 3,00,000 – 0%,
- Rs. 3,00,001 to Rs. 7,00,000 – 5%,
- Rs. 7,00,001 to Rs. 10,00,000 – 10%,
- Rs. 10,00,001 to Rs. 12,00,000 – 15%,
- Rs. 12,00,001 to Rs. 15,00,000 – 20%
- Above Rs. 15,00,001 – 30%.
No Deductions or Exemptions:
- Most exemptions and deductions, including 80C, HRA, and LTA, are not available.
- Standard deduction is allowed (₹75,000, effective from Budget 2024).
Simplified Compliance:
- No need to maintain extensive documentation for exemptions or deductions.
Higher Take-Home Salary:
- Beneficial for individuals who do not have significant tax-saving investments.
Suitable for Certain Taxpayers:
- Ideal for those with fewer or no investments and deductions.
FAQs
Is rebate u/s 87A available under the new income tax structure?
Yes, in lieu of any specific exclusion, we can say that rebate u/s 87A amounting to Rs 12,500 is also available under the new income tax regime introduced in Budget 2020. In the budget 2023 announcement, the rebate under section 87A has been hiked to Rs. 25000 for taxable income up to Rs. 7 lakhs under the new tax regime. This is applicable for FY 2023-24.
Is health and education cess applicable under the new tax regime slabs AY2024-25?
Yes, the Health and education cess @4% will also apply under the new income tax regime.
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