With the announcement of the full Union Budget 2024-25, taxpayers in India are once again faced with the decision of choosing between the new tax regime and the old tax regime. Though the latest Budget has made the new tax regime more attractive, experts said it should still be seen on a case-by-case basis. Here’s the comparison of the income tax slabs under the new and old tax regimes for FY 2024-25, and which is more beneficial for different types of taxpayers.
Here are the income tax slabs for FY 2024-25:
New Tax Regime (FY 2024-25)
The new tax regime, introduced in the Budget 2020, aims to simplify the tax structure by offering lower tax rates while eliminating most deductions and exemptions. Here are the revised income tax slabs under the new tax regime for FY 2024-25:
- Income up to ₹3 lakh: Nil
- ₹3 lakh – ₹7 lakh: 5%
- ₹7 lakh – ₹10 lakh: 10%
- ₹10 lakh – ₹12 lakh: 15%
- ₹12 lakh – ₹15 lakh: 20%
- Above ₹15 lakh: 30%
2. Old Tax Regime (FY 2024-25)
The old tax regime allows taxpayers to claim various deductions and exemptions, such as HRA, LTA, and Section 80C, among others. The income tax slabs under the old tax regime for FY 2024-25 are as follows:
- Income up to ₹2.5 lakh: Nil
- ₹2.5 lakh – ₹5 lakh: 5%
- ₹5 lakh – ₹10 lakh: 20%
- Above ₹10 lakh: 30%
New Tax Regime vs Old Tax Regime: Which is Beneficial for You?
1. For Low-Income Earners (Up to Rs 5 Lakh)
“For individuals with an annual income of up to Rs 5 lakh, both regimes offer similar tax benefits due to the standard deduction under the old regime and the basic exemption limit in the new regime. However, the new tax regime might be slightly more advantageous due to its lower tax rates,” a tax expert said.
2. For Middle-Income Earners (Rs 5 Lakh – Rs 10 Lakh)
Middle-income earners who have limited investments and do not claim multiple deductions might find the new tax regime more beneficial due to its lower tax rates. On the other hand, those who extensively utilize deductions under Section 80C, 80D, and HRA may save more under the old tax regime, he added.
3. For High-Income Earners (Above Rs 10 Lakh)
“High-income earners who have significant investments and claim numerous deductions will likely benefit more from the old tax regime. The higher tax rates in the new regime may offset any savings made through lower tax rates if deductions are not claimed,” the tax expert said.
4. For Salaried Individuals
Salaried individuals with substantial exemptions like HRA, standard deduction, and Section 80C investments may find the old tax regime more favorable. The new tax regime, although simpler, may not offer the same level of tax savings for those who maximise their deductions, he said.
The expert, however, added that if no or very less investments or deduction options are available, the new tax regime is beneficial for salaried individuals also, he added.
“It is necessary to do a computation on both the regimes to conclude which regime is better for salaried individuals. However, for those who have no investments, the new tax regime is better,” he said.
5. For Self-Employed Individuals
Self-employed individuals with fewer opportunities to claim deductions may find the new tax regime more appealing. The lower tax rates and simplified structure can lead to significant tax savings for those who do not have substantial investments in tax-saving instruments.
“The choice between the new tax regime and the old tax regime for FY 2024-25 depends largely on the taxpayer’s income level, investment habits, and financial goals. While the new tax regime offers simplicity and lower rates, the old regime provides substantial savings through deductions and exemptions. Taxpayers should carefully evaluate their financial situation and consult a tax advisor if necessary to make the best decision,” the tax expert said.
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