Last Updated:
Here are the tax slabs, deductions, and rebates for the financial year 2024-25 or the assessment year 2025-26.
Taxpayers will soon be able to file their income tax returns (ITRs) from April 1, 2025, for FY 2024-25 or the assessment year 2025-26.
Taxpayers will soon be able to file their income tax returns (ITRs) from April 1, 2025, for the assessment year 2025-26. The ITRs can be filed offline or online mode. The income tax department will notify as soon as the offline and online ITR forms are live. Meanwhile, taxpayers can do tax calculations for themselves as to which regime is better for them. Here are the tax slabs, deductions, and rebates for the financial year 2024-25 or the assessment year 2025-26.
It is important to know that the Rs 12 lakh tax-free income announcement in Budget 2025 will become applicable from the next financial year 2025-26 or the assessment year 2026-27, not FY25.
Old Tax Regime
There are over 70 exemptions and deductions available under the old tax regime to lower the tax burden of the individuals. For investing or spending on specific financial instruments, taxpayers can claim deductions.
For an example, Section 80C of the Income Tax Act, 1961 help the taxpayers to save up to Rs 1.5 lakh a year for various investments. To avail the benefits, individuals need to invest the amount in eligible schemes or spend the money on the specified deductible in the same financial year. The investments include Employees’ Provident Fund (EPF), Public Provident Fund (PPF), Equity Linked Saving Scheme (ELSS), National Pension Scheme (NPS), Unit Linked Insurance Plan (ULIP), Sukanya Samriddhi Yojana (SSY), National Savings Certificate (NSC), and five-year tax-saving fixed deposits with a bank and/or post office.
Taxpayers can also opt for a deduction of up to Rs 25,000 for insurance premiums. If the insured is above 60 years, the deduction can increase to up to Rs 50,000.
Salaried individual can claim exemptions on components of their salaries such as House Rent Allowance (HRA) and Leave Travel Allowance (LTA). A standard deduction of Rs 50,000 will also be available under the old tax regime.
Under the old regime, income tax rates continue to remain the same:
- Income up to Rs 2,50,000: Nil
- Income from Rs 2,50,001 to Rs 5,00,000: 5%
- Income from Rs 5,00,001 to Rs 10,00,000: 20%
- Income above Rs 10,00,000: 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.
New Tax Regime
The concessional tax regime, which was introduced in Budget 2020, has more tax slabs and lower tax rates as compared to the old system. Also, the exemptions and deductions of the old tax regime have been removed.
However, the standard deduction of Rs 50,000 is applicable for the new tax regime also. Importantly, this will increase to Rs 75,000 in the next FY26.
Under the new regime, income tax rates for FY 2024-25 are as follows:
- 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%.
List of Some of the Exemptions and Deductions that Will Not Be Available Under New Tax Regime:
1) Leave travel allowance or LTA;
2) House rent allowance or HRA;
3) Standard deduction of Rs 50,000 currently available to all salaried individuals and pensioners;
4) Special deduction allowance under Rule 2BB (such as children education allowance, hostel allowance, transport allowance, per diem allowance, uniform allowance, etc.);
5) Allowance for clubbing of income of minor;
6) Exemption of SEZ under section 10 AA;
7) Deduction for entertainment allowance and professional tax under Section 16;
8) Tax benefit on interest paid on housing loan taken for a self-occupied or vacant house property which resulted in a loss from house property under Section 24;
9) Various deductions under Sections 32AD, 33AB and 33ABA;
10) Deductions for donation on or expenditure on scientific research under Section 35;
11) Deduction under section 35AD or 35CCC;
12) Deduction of Rs 15,000 allowed from family pension under clause (iia) of Section 57;
13) Tax deduction claimed under chapter VI-A (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc.)
It must be mentioned that deduction under sub-section (2) of section 80CCD (employer contribution on account of employee in notified pension scheme-mostly NPS) and section 80JJAA (for new employment) can still be claimed;
14) Deductions under Section 80TTA or 80 TTB
Old Vs New: Which Tax Regime Should You Choose?
According to a tax practitioner, “Those who have an annual income up to Rs 7 lakh should go for the new tax regime. However, those earning above that must get a computation from their accountants to have a clear idea about the tax implications.”
