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Budget 2024: Income Tax Slabs for FY 2024-25

Budget 2024 Income Tax Slabs for FY 2024-25

Budget 2024: Income Tax Slabs for FY 2024-25

In the interim fiscal year 2024-25 budget, Finance Minister Nirmala Sitharaman announced no changes to the income tax slabs, meaning taxpayers will calculate their taxes for the upcoming year just as they have for the current year, 2023-24. Every year, taxpayers face the decision to choose between the old and new tax regimes, a choice that significantly impacts their financial planning. This article explores the nuances of both regimes, emphasizing the continued influence of Budget 2023’s updates on the tax framework. Through a direct comparison of the old and new regimes, including detailed income tax slabs and rates, the article aims to provide taxpayers with the necessary information to make informed financial decisions.

Budget 2024: Income Tax Slabs Unchanged for FY 2024-25

The finance minister, Nirmala Sitharaman, did not change the income tax slabs for the upcoming financial year 2024-25 (April 1, 2024-March 31, 2025) in the interim budget 2024. This means individuals will calculate the income tax payable on their incomes the same way they do for the current financial year 2023-24 (April 1, 2023-March 31, 2024).

According to income tax regulations, individuals without business income must select either the new or old tax regime annually. This allows them to opt for the new tax regime in one year and switch to the old one the following year.

Income Tax Slab

An income tax slab is a system used in India to apply income tax to individuals. This system assigns different tax rates to different income ranges, meaning that as an individual’s income increases, so does the tax rate they are subject to. This progressive approach to taxation aims to ensure a fair distribution of tax burdens across different income levels. Income tax slabs are subject to periodic revisions, often announced during the annual budget, to reflect economic conditions and policy objectives. These rates can vary for different categories of taxpayers.  

Income Tax Slabs for FY 2024-25   

Significant updates to the new tax regime were introduced in Budget 2023, with changes to the income tax slabs applicable for the current financial year from April 1, 2023, to March 31, 2024. These changes will continue into FY 2024-25, spanning April 1, 2024, to March 31, 2025, without further alterations.

The income tax slabs vary significantly between the old and new tax regimes, with the old regime’s slab rates further segmented into three distinct categories:

  • Indian Residents under 60 years and all non-residents
  • Resident Senior Citizens aged 60 to 80 years
  • Resident Super Senior Citizens aged over 80 years

Income Tax Slab Rate FY 2024-25 For New Regime

For the Financial Year 2023-24 (Assessment Year 2024-25) under the New Regime, the income tax slab rates are structured as follows:

Income Slabs Income Tax Rates for FY 2023-24 (AY 2024-25)
Up to ₹3,00,000 Nil
₹3,00,000 to ₹6,00,000 5% on income exceeding ₹3,00,000
₹6,00,000 to ₹9,00,000 ₹15,000 + 10% on income exceeding ₹6,00,000
₹9,00,000 to ₹12,00,000 ₹45,000 + 15% on income exceeding ₹9,00,000
₹12,00,000 to ₹15,00,000 ₹90,000 + 20% on income exceeding ₹12,00,000
Above ₹15,00,000 ₹150,000 + 30% on income exceeding ₹15,00,000

This structure clearly shows how taxes are calculated at each income slab, ensuring a progressive tax rate that increases with higher income brackets.

Income Tax Slab Rate FY 2024-25 For  Old Tax Regime

The income tax slab rates for the Old Tax Regime vary based on age groups. Here are the details for individuals aged between 60 and 80 years:

Old Tax Regime for Individuals Below 60 Years & HUF

Income Slabs Tax Rate for Individuals Below 60 Years and NRIs
Up to ₹2.5 lakh NIL
₹2.5 lakh – ₹5 lakh 5%
₹5 lakh – ₹10 lakh 20%
Above ₹10 lakh 30%

Note:

  • The income tax exemption limit is up to ₹2,50,000 for individuals, HUFs below 60 years of age, and NRIs.
  • Surcharge and cess are applicable as per rules.

Old Tax Regime for Senior Citizens (60-80 Years)

Income Slabs Tax Slabs for Senior Citizens (60 to <80 Years)
₹0 – ₹3 lakh NIL
₹3 lakh – ₹5 lakh 5%
₹5 lakh – ₹10 lakh 20%
Above ₹10 lakh 30%

Note:

  • The income tax exemption limit is up to ₹3 lakh for senior citizens aged 60 to less than 80 years.
  • Surcharge and cess are applicable as per rules.

Old Tax Regime for Super Senior Citizens (80+ Years)

Income Slabs Tax Slabs for Super Senior Citizens (>80 Years)
₹0 – ₹5 lakh NIL
₹5 lakh – ₹10 lakh 20%
Above ₹10 lakh 30%

Note:

  • The income tax exemption limit is up to ₹5 lakh for super senior citizens aged 80 years and above.
  • Surcharge and cess are applicable as per rules.

Comparison of Tax Rates under the New tax regime & Old tax regime for FY 2024-25  

 Slabs Old Tax Regime
<60 years & NRIs >60 to <80 years > 80 years FY 2024-25
₹0 – ₹2,50,000 NIL NIL NIL NIL
₹2,50,000 – ₹3,00,000 5% NIL NIL NIL
₹3,00,000 – ₹5,00,000 5% 5% (tax rebate u/s 87A is available) NIL 5%
₹5,00,000 – ₹6,00,000 20% 20% 20% 5%
₹6,00,000 – ₹7,50,000 20% 20% 20% 10%
₹7,50,000 – ₹9,00,000 20% 20% 20% 10%
₹9,00,000 – ₹10,00,000 20% 20% 20% 15%
₹10,00,000 – ₹12,00,000 30% 30% 30% 15%
₹12,00,000 – ₹12,50,000 30% 30% 30% 20%
₹12,50,000 – ₹15,00,000 30% 30% 30% 20%
>₹15,00,000 30% 30% 30% 30%

How to Calculate Income Tax?

Priya’s total taxable income is Rs 7,00,000, after accounting for various income sources like her salary, income from investments, and any rental earnings. She has also taken into account all applicable deductions under Section 80. Priya is curious about her tax obligations for FY 2022-23 (AY 2023-24).

Income Slabs Tax Rate Calculated Tax
Up to Rs 2,50,000 No tax
Rs 2,50,000 to Rs 5,00,000 5% (Rs 5,00,000 – Rs 2,50,000) Rs 12,500
Rs 5,00,000 to Rs 7,00,000 20% (Rs 7,00,000 – Rs 5,00,000) Rs 40,000
Above Rs 10,00,000 30%
Total Taxable Amount Rs 52,500
Health and Education Cess 4% of Rs 52,500 Rs 2,100
Total Tax for FY 2022-23 Rs 54,600

Note: Priya is entitled to an income tax exemption of up to Rs 2,50,000 as an individual taxpayer. The exemption limits differ for senior citizens (Rs 3,00,000) and super senior citizens (Rs 5,00,000).

Click here to access an income tax calculator.

Key Features of the New Tax Regime

  • Uniform Tax Rates: The New tax regime offers the same tax rates for all individual categories, including regular individuals, senior citizens, and super senior citizens.
  • Tax Rebate for Low-Income Individuals: Individuals with a net taxable income of up to Rs 5 lakh qualify for a tax rebate under section 87A, resulting in zero tax liability under both the New and the Old tax regimes.
  • Rebate in Budget 2024: For the current financial year 2024, there have been no amendments to the enhanced rebate introduced in Budget 2023. As per the updated provisions, incomes up to Rs 7 lakh remain exempt from tax under the New regime, effective from FY 2023-24.
  • Surcharge on High Income: A surcharge is applied when income exceeds certain thresholds, with the rates being:
    • 10% for income above Rs 50 lakh
    • 15% for income above Rs 1 crore
    • 25% for income above Rs 2 crore
    • 37% for income above Rs 5 crore
  • In the current financial year 2024, following the changes implemented in Budget 2023, the maximum surcharge rate in the New tax regime for incomes over Rs 5 crore has been reduced to 25% from the previous 37%, with this adjustment taking effect from April 1, 2023.
    • Exclusions from High Surcharge Rates: Surcharge rates of 25% or 37% do not apply to income taxable under specific sections related to capital gains on shares and income of Foreign Institutional Investors, capping the surcharge at 15% for such incomes.
    • Surcharge Cap for Certain Incomes: From the Assessment Year 2023-24, the maximum surcharge on tax payable for dividend income or capital gains, as mentioned in Section 112, as well as for an Association of Persons (AOP) consisting entirely of companies, is capped at 15%.
    • Health and Education Cess: 4% is levied on all cases’ total income tax liability and surcharge.

Choosing the New Tax Regime: What You Need to Know

Taxpayers who opt for the concessional rates under the New Tax Regime must relinquish a range of exemptions and deductions previously available under the old regime. Overall, there are 70 such exemptions and deductions, with the most commonly utilized ones highlighted below:

Comparing Old and New Tax Regimes

Particulars Old Tax Regime   New Tax Regime  
Income level for rebate eligibility ₹5 lakhs ₹7 lakhs
Standard Deduction ₹50,000 ₹50,000
Effective Tax-Free Salary income ₹5.5 lakhs ₹7.5 lakhs
Rebate u/s 87A ₹12,500 ₹25,000
HRA Exemption Available Not Available
Leave Travel Allowance (LTA) Available Not Available
Other allowances (including food allowance) Available Not Available
Interest on Home Loan u/s 24b (self-occupied/vacant property) Available Not Available
Interest on Home Loan u/s 24b (let-out property) Available Available
Deduction u/s 80C (Investments, tuition fee, etc.) Available Not Available
Employee’s (own) contribution to NPS Available Not Available
Employer’s contribution to NPS Available Available
Medical insurance premium – 80D Available Not Available
Disabled Individual – 80U Available Not Available
Interest on education loan – 80E Available Not Available
Deduction on Family Pension Income Available Available
Gifts up to ₹50,000 Available Available
Exemption on voluntary retirement 10(10C) Available Available
All contributions to Agniveer Corpus Fund – 80CCH Available Available

Here are the key changes introduced on 1st April 2023 under the New Regime:

  • Income Rebate Threshold Increase: The eligibility for income tax rebate has been raised from ₹5 lakhs to ₹7 lakhs. This means that individuals with a taxable income of up to ₹7 lakhs will be eligible for a rebate on their income tax.
  • Standard Deduction Reintroduction: A standard deduction of ₹50,000, previously unavailable under the new regime, has been reintroduced. This deduction allows taxpayers to reduce their taxable income by ₹50,000 before calculating their tax liability.
  • Increased Rebate under Section 87A: The rebate under Section 87A has been doubled to ₹25,000 for qualifying individuals. This rebate provides a direct reduction in the amount of income tax payable by eligible taxpayers.

Choosing Between the Old and New Tax Regimes: A Comparative Example

The decision between the old and new tax regimes depends largely on one’s income level, investment habits, and financial planning.

For Middle-Class Taxpayers

New Tax Regime: This is generally more favourable for middle-class taxpayers with a taxable income of up to Rs 15 lakh, particularly those not investing heavily in tax-saving schemes. Since the new regime offers seven lower tax slabs, it can result in lower tax liabilities for individuals who don’t claim many deductions.

Example: An individual with a pre-deduction income of Rs 12 lakh but investments below Rs 1.91 lakh would face a higher tax liability under the old regime than the new one.

For High-Income Earners

Old Tax Regime: High-income earners might find the old regime more beneficial, especially if they have significant investments in tax-saving instruments, expenses eligible for deductions (like children’s tuition fees, home loan EMIs), mediclaim, life insurance, etc. The old regime offers more deduction opportunities, potentially leading to significant tax savings.

Making a choice

Conducting a detailed analysis comparing both regimes is crucial based on your financial situation. Factors to consider include your total income, the extent of your investments in tax-saving schemes, and other deductible expenses.

Timing for Opting

  • For Salary Income: You can choose the regime at the beginning of the financial year and communicate your choice to your employer. This choice cannot be changed during the year but can be revised when filing your Income Tax Return.
  • For Business & Professional Income: If your income includes earnings from a business or profession, the selection between the tax regimes can only be made once in a lifetime.

Given these considerations, there’s no one-size-fits-all answer. Taxpayers should evaluate their circumstances, possibly with the help of a financial advisor, to decide which regime offers them the most benefit.

For detailed information on income tax rates, consult our experts and ensure you file your returns accurately.