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 ranges of income used to define how much income you must pay tax on. it is progressive; the more you earn, the more you pay in taxes. Income tax slabs are set up every year by the Finance Ministry, which reissues a declaration to taxpayers, including individuals, Hindu Undivided Families (HUFs), and firms.
India follows a progressive tax system, so the higher the income, the more it progressively goes up.

Old vs New Tax Regime

The introduction of the New Tax Regime in FY 2020-21 gave taxpayers the choice to either continue with the Old Tax Regime or opt for the New Tax Regime. Both regimes offer a distinct approach to tax calculation.

Old Tax Regime:

The Old Tax Regime allows taxpayers to avail themselves of various exemptions, deductions, and rebates. Common deductions include Section 80C (for investments in provident funds, life insurance, etc.), House Rent Allowance (HRA), and the Standard Deduction. The Standard Deduction of ₹50,000 is a straightforward reduction from your taxable income.
Under this regime, tax rates are higher, but you can benefit from these deductions and exemptions, ultimately reducing your taxable income and the taxes you owe.

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)

Key Features of the New Tax Regime

1. Lower Tax Rates:

The new regime provides lower tax rates across various income brackets. For instance, those earning ₹5 lakh to ₹7.5 lakh are taxed at just 10%, compared to 20% in the Old Tax Regime. The new structure is designed to simplify the tax filing process by eliminating the need for complicated exemptions and deductions.

2. No Deductions Allowed:

Unlike the Old Tax Regime, where you can claim deductions for a variety of expenses and investments, the New Tax Regime doesn’t allow these. This means that taxpayers will have to make a choice: Opt for the simplicity and lower tax rates of the new regime or stick with the old system to benefit from the deductions.

3. No Standard Deduction:

One of the most important points to note about the New Tax Regime is that there is no standard deduction. So, if you are used to claiming this in the Old Regime, you will not be able to do so under the New Tax Regime.

4. New Tax Regime Exemption List: Tax slabs

While the New Tax Regime doesn’t offer most of the traditional exemptions, there are still some exemptions available. These include:

• 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.

5. 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.

Choosing Between the Old and New Tax Regimes

Now, you may wonder which tax regime is better for you. Should you stick to the Old Tax Regime and claim deductions, or should you opt for the simpler New Tax Regime? Here’s a breakdown of how to make the choice:

1.  Opt for the Old Tax Regime :

• You have significant deductions (like 80C, HRA, home loan interest, etc.)
• You are looking for exemptions like the standard deduction of ₹50,000 or want to reduce your taxable income.
  
• You are comfortable with tax planning and record-keeping to maximize your deductions.

2.  Opt for the New Tax Regime :

• You don’t claim many deductions or exemptions.
  
• You prefer lower tax rates with minimal paperwork.
• You want a simpler, straightforward tax structure without dealing with documentation

Conclusion: Tax Regime Decision

Understanding the income tax slabs for FY 2024-25 & AY 2025-26 is important to your tax planning. The New Tax Regime is easy and has lower tax rates, but you won’t be able to claim deductions. The Old Tax Regime is the opposite, as many different deductions can be claimed to reduce your taxable income, but the tax rates are higher. 

 It is also important that senior citizen taxpayers will benefit from good tax benefits under both regimes, including an even higher exemption limit applicable in the Old Tax Regime. 

Ultimately, it will depend on your income, your deductions, and whether you enjoy the simplicity of lower tax rates. You need to analyze your financial circumstances before making the switch. 

Want to benefit from the best tax savings in FY 2024-25? Call Credit Bridge Advisors today, and let us help you with step-by-step planning with the Old vs New Tax Regime. You may want to take full advantage of your deductions or appreciate the low tax rates, and a professional can help you with the best path forward for your financial objectives. Get started now!