In India, income tax is based on the income tax slabs and costs, which are determined each year. The income tax slabs are distinct under old and new tax regimes. For this year, from April, the income tax slab implemented for the financial year may be 2024-25, and the assessment year will be 2025-26.
Based on new income tax slab structures, exceptional tax rates are applied to salary stages. When there’s a growth in salary, the tax fee also increases. Income tax is set by the authorities’ salary tax department.
What is an Income Tax Slab?
An income tax slab is a hard and fast income stage that might be taxed at a set rate set by the government. The income tax slab in India determines how much tax an individual needs to pay based on their taxable income. The government revises the income tax slabs on a daily basis to account for changes in inflation and the cost of living.
The income tax slabs are divided into different categories, which include individual taxpayers, Hindu Undivided Families (HUFs), corporations, and corporations. Different tax rates are observed for different levels of taxable salary in each class, with higher costs applied to higher levels of income.
Also Read:- Income Tax Slab and Rates for FY 2023-24 | How to Calculate Income Tax For Salaried Persons
New Income Tax Slabs For FY 2024-25
In response to the Union Budget 2023, good-sized amendments were made to the salary slip tax structure under the new tax regime for the financial year 2023-24, applicable from Assessment Year 2024-25. A notable amendment in the income tax slabs 24-25 consists of the discount of tax slabs from 6 to 5, along with an increase in the basic exemption limit from Rs. 2.5 lakh to Rs. 3 lakh. These changes, effective from 1 April 2023, aim to simplify the tax-paying way and provide relief to taxpayers.
Income Tax Slabs Under New Tax Regime for FY 2023-24, FY 2024-25
| Range of Income | Tax Rate |
|---|---|
| Up to Rs. 3,00,000 | Nil |
| Rs. 3,00,001 to Rs. 6,00,000 | 5% |
| Rs. 6,00,001 to Rs. 9,00,000 | 10% |
| Rs. 9,00,001 to Rs. 12,00,000 | 15% |
| Rs. 12,00,001 to Rs. 15,00,000 | 20% |
| Above Rs. 15,00,00 | 30% |
Income Tax Slabs For the Old Tax Regime
For the old tax regime, here is information on income tax slabs-
| Old Tax Regime Slabs | Individuals | ||
| (Age < 60 years) | Resident Senior Citizens | ||
| (More than 60 but less than 80 years) | Resident Super Senior Citizens | ||
| (80 years and above) | Individuals | ||
| Old Tax Regime Slabs | Individuals | ||
| Upto Rs 2,50,000 | Nil | Nil | Nil |
| Rs 2,50,001 to Rs 3,00,000 | 5% | Nil | Nil |
| Rs 3,00,001 to Rs Rs 5,00,000 | 5% | 5% | Nil |
| Rs 5,00,001 to Rs 10,00,000 | 20% | 20% | 20% |
| Above Rs 10,00,000 | 30% | 30% | 30% |
Old Tax Regime Vs New Tax Regime for FY 2024-25
The advent of the new tax regime in the 2020 Budget, with similar amendments in 2023, has stirred big discussions amongst taxpayers. Comparing the old and new tax regimes facilitates in knowledge which option may be more useful based totally on personal economic conditions and choices.
New Tax Regime
The new tax regime, effective from 1 April 2020, reduces tax charges for higher incomes compared to the old regime, aiming to reduce tax liability under positive conditions. This regime is optional.
Old Tax Regime
Under the old regime, taxpayers have the option to claim over 70 different tax deductions and exemptions, inclusive of the ones under Section 80C, HRA, LTA, etc., to minimise taxable income.
Comparing the Tax Rates of the Old Tax Regime and the New Tax Regime
Here is a tabular of the tax fees throughout the old tax regime for FY 2023-24 (AY 2024-25), the new tax regime earlier than Budget 2023 (until 31 March 2023), and the new tax regime after Budget 2023 (applicable from 1 April 2023):
| Income Range | Old Tax Regime | New Tax Regime (Before Budget 2023) | New Tax Regime (After Budget 2023) |
|---|---|---|---|
| Rs. 0 – Rs. 2,50,000 | Nil | Nil | Nil |
| Rs. 2,50,001 – Rs. 3,00,000 | 5% | 5% | Nil |
| Rs. 3,00,001 – Rs. 5,00,000 | 5% | 5% | 5% |
| Rs. 5,00,001 – Rs. 6,00,000 | 20% | 10% | 5% |
| Rs. 6,00,001 – Rs. 7,50,000 | 20% | 10% | 10% |
| Rs. 7,50,001 – Rs. 9,00,000 | 20% | 15% | 10% |
| Rs. 9,00,001 – Rs. 10,00,000 | 20% | 15% | 15% |
| Rs. 10,00,001 – Rs. 12,00,000 | 30% | 20% | 15% |
| Rs. 12,00,001 – Rs. 12,50,000 | 30% | 20% | 20% |
| Rs. 12,50,001 – Rs. 15,00,000 | 30% | 25% | 20% |
| More than Rs. 15,00,000 | 30% | 30% | 30% |
Must Read:- How is Gratuity calculated in CTC? | How to Answer “What Are Your Salary Expectations?” | How to Calculate Gratuity
Conditions for Opting for the New Tax Regime
The taxpayers who’ve opted for the new regime will have a tendency to forgo a few deductions and exemptions that might be 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 training allowance
- Professional tax
- Daily costs in the direction of employment
- Helper allowance
- Standard deduction on salary
- Interest on housing loan (Section 24)
- Other special allowances (Section 10(14)
Exemptions/Deductions unavailable under the FY 24-25 new tax regime?
The 2020 cost range has eliminated about 70 of the exemptions available under the new regime. The following exemptions and deductions are a number of the most important ones that might not be available if the new tax regime slab is selected for tax calculation –
- House Rent Allowance under Section 10 (13A)
- Leave Travel Allowance under Section 10(5)
- Allowances underneath Section 10(14)
- Food coupons and different tax-free allowances and perquisites
- Deductions under Chapter VI A of the Income Tax Act like Section 80C, 80D, 80TTA, and so forth.
- Deduction for home loan interest paid for self-owned house property under Sections 24 (b) and Section 80 EEA
Exemptions/Deductions are Available under the FY 24-25 New Tax Regime?
Under the new income tax brackets 24-25, taxpayers can nevertheless avail of deductions and exemptions, no matter the removal of many previously available ones. These consist
- NPS Contributions by Employer: Contributions to the National Pension System (NPS) through a business enterprise, up to 10% of the income of the worker (and 14% for Central Government employees), are deductible under Section 80CCD(2).
- Standard Deduction on Rental Income: For rented-out belongings, a well known deduction of 30% of the net salary is authorised, simplifying the calculation of taxable salary from house property.
- Home Loan Interest: Interest paid on a home loan for a permit-out property can be deducted from the income earned, although a loss from residence assets can’t be offset towards other salary heads.
- Transport Allowance for Divyang Employees: Divyang (disabled) employees are eligible for a delivery allowance exemption to cover daily tour charges between their place of work and home.
- Conveyance Allowance: Expenses incurred on conveyance for reputable duties are permissible as a conveyance allowance.
- Allowances for Travel and Transfer: Allowances given to employees for the costs related to tour or transfer are exempt.
- Daily Allowance: A daily allowance received to cover daily costs even as far from the normal location of duty is also allowed.
How to Calculate Income Tax for Income Tax Slabs for FY 24-25
To illustrate the technique of salary tax calculation, please do not forget the state of affairs of Anjali, a salaried person with an annual salary of Rs. 9,00,000. Anjali is entitled to deductions beneath Section 80C amounting to Rs. 2,00,000.
Firstly, Anjali determines her gross taxable income by subtracting the deductions from her total salary. This calculation is as follows: Rs. 9,00,000 (total salary) minus Rs. 2,00,000 (deductions), resulting in a gross taxable salary of Rs. 7,00,000. Next, we investigate the applicable tax slabs that are based hence:
- Up to Rs. 2,50,000: 0% tax
- Rs. 2,50,001 to Rs. 5,00,000: 5% tax
- Rs. 5,00,001 to Rs. 10,00,000: 20% tax
- Above Rs. 10,00,000: 30% tax
Given that Anjali’s income falls in the Rs. 5,00,001 to Rs. 10,00,000 range, the relevant tax cost for her is 20%.
To compute the tax payable, we calculate the salary that falls in this slab (Rs. 7,00,000 – Rs. 5,00,000) and apply the 20% tax rate. Accordingly, the tax amount for Anjali in this slab is Rs. 40,000. Regarding the surcharge, Anjali now does not need to trouble herself, as surcharges are levied on earnings exceeding Rs. 50 lakhs and her income does not attain this threshold. Thus, for the financial year 2023-24, Anjali’s total income tax legal responsibility amounts to Rs. 40,000.
Conclusion
The income tax slab rate in India has gone through big modifications over the last few years. By introducing current changes with the Income Tax slabs for FY 2023-24, the government is making an attempt to simplify the ordinary tax system for all people and agencies.