As we enter the new FY 2025-26, it is prudent to be equipped with an understanding of the income tax slabs that may apply for that financial year. In India, the government has introduced two tax regimes: the Old Tax Regime and the New Tax Regime. Each of these tax regimes comes with allotments of income tax slabs, exemptions, and deductions. The only distinction between them is the benefits availed under each.
In this blog, we are going to provide a comprehensive overview of the Income Tax Slabs for FY 2024-25 & AY 2025-26, outline the Old Regime Tax Slab, Standard Deduction in the New Tax Regime, and explain the differences between the Old vs New Tax Regimes.

What Are Income Tax Slabs?

Income tax slabs are increments of income that determine the rate at which the income is taxed. It is progressive in nature, meaning the more you earn, the more tax you pay. Income tax slabs are announced every year by the Ministry of Finance, and a declaration is issued to the taxpayers that includes individuals, Hindu Undivided Families (HUF), and companies. 

India has a progressive system, so the more you earn, the more it goes up progressively.

Old vs New Tax Regime

As a result of the New Tax Regime being introduced in FY 2020-21, taxpayers were given the option to remain with the Old Tax Regime or move to the New Tax Regime. The main difference between the two regimes is how your tax is calculated.

Old Tax Regime:

The Old Tax Regime allows taxpayers to take advantage of the various exemptions, deductions, and rebates that are available. For the Old Tax regime, the usual deductions are Section 80C (investment into provident funds, life insurance, etc.), House Rent Allowance (HRA), or the Standard Deduction. The standard deduction is ₹50,000, which is a sizable deduction from your taxable income. 

Tax rates for this regime are higher, but you can take advantage of many deductions and exemptions, which ultimately reduce your taxable income and taxes owed to the government.

Income Tax Slabs Under the Old Regime (FY 2024-25 & AY 2025-26)

Standard Deduction:
In the Old Tax Regime, taxpayers can avail of a Standard Deduction of ₹50,000 for salaried individuals and pensioners, which further reduces their taxable income.

New Tax Regime:

The New Tax Regime, introduced in 2020, was designed to offer a simpler tax system with lower tax rates, but without most of the exemptions and deductions available in the Old Tax Regime. While this regime offers lower tax rates, you cannot claim deductions like Section 80C, HRA, medical insurance premiums, or home loan interest. It’s best suited for taxpayers who do not rely heavily on deductions and exemptions.

Income Tax Slabs Under the New Regime (FY 2024-25 & AY 2025-26)

Main Features of the New Tax Regime

1. Lower Tax Rates:

The new regime offers lower tax rates in all tax brackets. For example, when you earn between ₹5 lakh and ₹7.5 lakh and are only paying 10% tax rather than 20% in the Old Tax Regime, there is a substantial difference in tax paid. The new regime is designed to be easier for taxpayers in that it minimizes tax filing requirements that include exemptions and deductions, so taxpayers have to do less work to explain all the different deductions and exemptions.

2. No Deductions Allowed:

The biggest key takeaway from the Old Tax Regime and New Tax Regime is that you don’t get to deduct any type of expenses or investments paid for. Under the Old Tax Regime, you could make a claim for deductions related to these, but with the new Tax Regime, you will have to choose between opting for the new regime with its ease of low tax rates or continuing to use the old system for your deductions.

3. No Standard Deduction:

Another important item for you to take note of is that there is NO standard deduction in the New Tax Regime. Therefore, if you were claiming a standard deduction under the Old Regime, then in the New Tax Regime you will not able to claim this deduction.

4. New Tax Regime Exemption List:

There are generally not many traditional exemptions, and therefore, the exemptions you may be able to claim under the New Tax Regime are fairly straightforward and may be significant.

• Contributions to National Pension Scheme (NPS)
  
• Employer’s contribution to Employee Provident Fund (EPF) and Gratuity
  
• Leave encashment for employees.
  

However, other exemptions like House Rent Allowance (HRA), Home Loan Interest, and Section 80C deductions are not available.

Senior Citizen Tax Slab (For FY 2024-25 & AY 2025-26)

Senior Citizens (60 years or above but below 80 years)

For senior citizens, the tax rules are more favorable in both tax regimes. The basic exemption limit is higher than for regular individuals.

• Old Tax Regime:

Senior citizens can enjoy a higher exemption limit of ₹3 lakh compared to ₹2.5 lakh for individuals below 60. The income tax slabs for senior citizens under the Old Tax Regime are as follows:

• New Tax Regime:

For senior citizens under the New Tax Regime, the basic exemption limit remains ₹2.5 lakh, but the tax rates are lower, as mentioned previously.

Deciding Between the Old Tax Regime and the New Tax Regime

Now, you may be asking yourself which of the tax regimes is better for you. Should you remain with the Old Tax Regime and claim deductions or follow the simpler route of the New Tax Regime? Here is a guide on how to make the decision:

1) Choose the Old Tax Regime if: 

• You have a lot of deductions (like 80C, HRA, home loan interest, DAW, etc.)
• You would like salary exemptions like \$50,000 of standard deduction or want to have a lower taxable income.
• You are comfortable with tax planning and maintaining records to help you maximize your deductions.

2) Choose the New Tax Regime if:

• You do not claim a number of deductions or exemptions.
• You would rather have lower tax rules and less paperwork.
• You want to keep it simple without having to worry about documentation, and you find the tax regime example simple and moderate.

Conclusion: Tax Regime Decision

It’s good to understand the income tax slabs for FY 2024-25 & AY 2025-26 as it relates to your comprehensive tax planning process. The New Tax Regime is easier and simpler, with lower tax rates but no deductions. The Old Tax Regime is totally the opposite: there will be many deductions you can claim that will potentially reduce your taxable income, but the tax rates will be higher. 

In addition, senior citizen taxpayers should note that there will be good tax benefits in both regimes, including an even higher exemption limit available in the Old Tax Regime. 

Ultimately, it will depend on your income, your deductions, and whether you prefer the simplicity of lower tax rates. You will want to evaluate your personal financial situation to think through if you want to switch. 

Want to take advantage of the best tax savings in FY 2024-25? Call Credit Bridge Advisors today and let us help you through a step-by-step process on Tax Regime comparison with the Old vs New Tax Regime, take your full deductions, or simply appreciate the lower tax rates. A professional can help you come up with the best way forward for your fiscal objectives. Get started!