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Income Tax, Union Budget 2025: Here’s the current income tax rates and slabs under both the New Tax Regime and the Old Tax Regime.
Income Tax: In the upcoming Budget 2025, the government is likely to provide tax relief for those earning up to Rs 15 lakh annually.
New Tax Regime Vs Old Tax Regime: As India awaits the announcement of the Union Budget 2025-26 on February 1, 2025, one of the most anticipated topics is income tax. Individuals and professionals alike are keen to see if the government introduces tax benefits or adjustments to the existing income tax structure. Among the most awaited announcements is a possible reduction in income tax for individuals earning up to Rs 15 lakh annually. Here’s the current income tax rates and slabs under both the New Tax Regime and the Old Tax Regime.
Current Tax Slabs Under the New Tax Regime (Applicable FY 2024-25)
The New Tax Regime, introduced in the Budget 2020, offers lower tax rates but fewer exemptions and deductions. Here are the current tax slabs:
- Income up to Rs 3,00,000: Nil
- Income from Rs 3,00,001 to Rs 7,00,000: 5% (tax rebate under Section 87A up to Rs 7 lakh)
- Income from Rs 7,00,001 to Rs 10,00,000: 10%
- Income from Rs 10,00,001 to Rs 12,00,000: 15%
- Income from Rs 12,00,001 to Rs 15,00,000: 20%
- Income above Rs 15,00,000: 30%
This is the default tax regime. Under this regime, taxpayers can opt for lower rates but must forgo popular exemptions like HRA, LTA, and deductions under Sections 80C, 80D, and others.
However, taxpayers can avail of a standard deduction. The standard deduction limit for salaried employees was increased to Rs 75,000 in the Budget 2024-25. For family pensioners, it was hiked to Rs 25,000.
Current Tax Slabs Under the Old Tax Regime (Applicable FY 2024-25)
The Old Tax Regime, while retaining higher rates, allows taxpayers to claim various exemptions and deductions. Here are the slabs:
- Income up to Rs 2,50,000: Nil
- Income from Rs 2,50,001 to Rs 7,00,000: 5%
- Income from Rs 7,00,001 to Rs 10,00,000: 10%
- Income from Rs 10,00,001 to Rs 12,00,000: 15%
- Income from Rs 12,00,001 to Rs 15,00,000: 20%
- Income above Rs 15,00,000: 30%
For senior citizens aged 60-80 years, the basic exemption limit is Rs 3,00,000. For super senior citizens (above 80 years), it is Rs 5,00,000.
The Old Tax Regime allows deductions under various sections, such as:
- Section 80C: Up to Rs 1,50,000 for investments like PPF, ELSS, and LIC premiums.
- Section 80D: Health insurance premiums.
- Section 24(b): Interest on home loan up to Rs 2,00,000.
- Other exemptions like HRA and LTA.
Key Differences Between the Two Regimes
| Aspect | New Tax Regime | Old Tax Regime |
|---|---|---|
| Tax Rates | Lower rates with no exemptions | Higher rates with exemptions |
| Exemptions & Deductions | Not allowed | Allowed |
| Best For | Individuals with fewer investments | Individuals with high investments |
Choosing the Right Tax Regime
Choosing between the New and Old Tax Regime depends on an individual’s financial profile. The New Tax Regime is more suitable for those who prefer simplicity and have minimal investments. Conversely, the Old Tax Regime benefits taxpayers who maximise exemptions and deductions.
Expectations for Budget 2025
The government may consider raising the basic exemption limit or introducing additional slabs to benefit middle-income groups. According to reports, the government is likely to provide tax relief for those earning up to Rs 15 lakh.
Industry bodies have also raised demand for that. Last week, Sanjiv Puri, chairman of the Confederation of Indian Industries (CII), said, “From a perspective of boosting consumption, we have suggested that there be some relief provided to income tax up to a Rs 20 lakh on the marginal income tax rate so that it boosts consumption, there is more disposable income and in turn also leads to buoyancy in revenues.”
FM Nirmala Sitharaman in the last Budget 2024-25 in July announced a comprehensive review of the Income Tax Act. Following this, the review committee was constituted led by Chief Commissioner of Income Tax V K Gupta.
