Income Tax Slabs for FY 2024-25 (AY 2025-26): New vs. Old Tax Regime

The financial year 2024-25 has brought revised income tax slabs, providing taxpayers with more clarity and benefits. This article delves into the comparison between the new and old tax regimes, the changes introduced, and how to determine the best option for your financial planning.

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Income Tax Slabs: A Comparison

New Tax Regime

The new tax regime focuses on simplified tax rates while forgoing most exemptions and deductions. Below are the tax slabs under this regime:

Annual Income (₹)	Tax Rate (%)
Up to 3,00,000	0%
3,00,001 to 7,00,000	5%
7,00,001 to 10,00,000	10%
10,00,001 to 12,00,000	15%
12,00,001 to 15,00,000	20%
Above 15,00,000	30%

Old Tax Regime

The old tax regime continues to allow various exemptions and deductions, including those under Sections 80C, 80D, and others. Its tax slabs are:

Annual Income (₹)	Tax Rate (%)
Up to 2,50,000	0%
2,50,001 to 5,00,000	5%
5,00,001 to 10,00,000	20%
Above 10,00,000	30%

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Key Changes in the New Tax Regime

1. Standard Deduction:
   • For salaried individuals, the standard deduction has increased from ₹50,000 to ₹75,000 under the new regime.
2. Tax Rebate under Section 87A:
   • Taxpayers with an income up to ₹7,00,000 can claim a rebate of ₹25,000, effectively making their tax liability zero.
3. Surcharge Rates:
   • No changes have been made to the surcharge rates for high-income earners.

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Factors to Consider: Choosing Between New and Old Tax Regimes

The choice between the new and old tax regimes depends on individual financial circumstances. Here are some points to consider:

1. Lower Tax Rates vs. Deductions:
   • The new regime offers lower tax rates but does not allow popular deductions like those for home loans, education loans, and investments under Section 80C.
2. Financial Goals:
   • If you have significant tax-saving investments or ongoing deductions, the old regime may be more beneficial. Conversely, the new regime simplifies filing for those with minimal deductions.
3. Income Levels:
   • Salaried individuals earning up to ₹7,00,000 can benefit from zero tax liability under the new regime due to the increased rebate.
4. Simplicity vs. Complexity:
   • The new tax regime simplifies filing by eliminating the need for multiple proofs and calculations, whereas the old regime offers more flexibility through exemptions.

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How to Choose the Right Tax Regime

• Step 1: Calculate your taxable income under both regimes.
• Step 2: Factor in deductions like 80C, 80D, or home loan interest under the old regime.
• Step 3: Compare the tax liabilities to decide which option results in greater savings.

For many taxpayers, especially those with lower incomes or fewer deductions, the new tax regime can be a straightforward choice. However, individuals with significant deductions might continue to benefit from the old regime.

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Income Tax Rate for Domestic Companies Under the New Income Tax Regime

The revised tax structure for domestic companies in India has been introduced to simplify compliance and encourage business growth. These tax rates, applicable to companies opting for the new regime, aim to foster economic stability and incentivize manufacturing and investment activities in the country. Below is a comprehensive comparison of the tax rates applicable under specific conditions:

Particulars	Existing or Old Regime Tax Rates	New Regime Tax Rates
Company opts for Section 115BAB (not covered in Sections 115BA and 115BAA) & is registered on/after October 1, 2019, and has started manufacturing on/before March 31, 2023	–	15%
Company opts for Section 115BAA, where the total income of a company has been calculated without claiming specified deductions, exemptions, incentives, and additional depreciation	–	22%
Company opts for Section 115BA registered on/after March 1, 2016, and is in the manufacture of any article or thing and does not claim a deduction as specified in the section	–	25%
Turnover/gross receipt of the company is less than ₹400 crores in the previous year	25%	25%
Other Domestic Companies	30%	30%

Key Insights from the Table:

1. Section 115BAB: A Boost for New Manufacturing Units
   Domestic manufacturing companies registered after October 1, 2019, benefit from the lowest tax rate of 15% under the new regime, fostering the “Make in India” initiative.
2. Section 115BAA: Simplified Taxation for All Domestic Companies
   Companies opting for this provision pay a reduced tax rate of 22%, provided they forgo specified exemptions and deductions, promoting tax simplicity.
3. Section 115BA: For Manufacturing Companies Since 2016
   Manufacturing companies registered after March 1, 2016, that do not claim certain deductions, continue to benefit from a moderate tax rate of 25%.
4. Turnover-Based Tax Rate
   Companies with a turnover below ₹400 crores are taxed at 25%, maintaining consistency between the old and new regimes for this category.
5. General Domestic Companies
   Companies not covered under the specific provisions above pay the standard tax rate of 30%, as per the old tax regime.

Advantages of the New Tax Regime for Domestic Companies:

• Competitiveness in Manufacturing: The reduced rates under Section 115BAB and 115BA aim to attract investment in manufacturing and reduce the cost of doing business.
• Simplified Compliance: Taxpayers can opt for straightforward rates by forgoing deductions and exemptions, simplifying tax filing.
• Encouragement for Smaller Businesses: The continued 25% tax rate for companies with turnover below ₹400 crores ensures smaller companies remain competitive.

Conclusion

The revised income tax slabs for FY 2024-25 offer taxpayers an opportunity to choose a regime best suited to their needs. While the new tax regime simplifies tax calculations and lowers rates, the old regime provides room for strategic financial planning through deductions. Understanding your financial situation and consulting with a tax advisor will help you make an informed decision.

Stay updated with changes in tax laws and choose wisely to optimize your tax savings!