Income Tax Slab: India has a tax slab system for income tax. Here, the income of taxpayers is categorised into slabs or ranges, and they are given certain tax rates. People with higher incomes are taxed at higher income tax slabs in proportion to their income under this progressive taxation system.
Let’s go over the various income tax slabs under the old and new tax regimes so you have a better grasp now that you know what they are.
Many people bought life insurance for a number of years just to save money on taxes. In actuality, life insurance is an essential component of any sensible financial strategy. Let’s get a better understanding of the new rules and regulations before we make financial plans for the upcoming financial year.
A few change to the new tax system were added in the budget for the next year, which was presented by the finance minister in February 2023. The finance minister expanded the standard deduction to include pensioners and the salaried class while reducing the number of tax levels.
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Comparison of Tax Rates under New Tax Regime and Old Tax Regime for FY 2024-25 (AY 2025-26)
You can better understand the main difference between the old and new tax systems income tax slabs by looking at the following table:
| Income Tax Slabs | Old Tax Regime | New Tax Regime |
| Rs. 0 to Rs. 2,50,000 | Nil | Nil |
| Rs. 2,50,000 to Rs. 3,00,000 | 5% | Nil |
| Rs. 3,00,000 to Rs. 5,00,000 | 5% | 5% |
| Rs. 5,00,000 to Rs. 7,00,000 | 20% | 5% |
| Rs. 7,00,000 to Rs. 10,00,000 | 20% | 10% |
| Rs. 10,00,000 to Rs. 12,00,000 | 30% | 15% |
| Rs. 12,00,000 to Rs. 12,50,000 | 30 % | 20% |
| Rs. 12,50,000 to Rs. 15,00,000 | 30% | 20% |
| More than Rs. 15,00,000 | 30% | 30% |
Revisions to the New Tax Regime in Budget 2024
Significant changes to the new tax system were made in the Union Budget 2024 with the goals of boosting inclusivity, facilitating compliance, and giving taxpayers more financial flexibility. The following are the main changes made to the new tax system in Budget 2024:
- Updated Tax Slabs
Under the new tax system, India’s income tax slabs went through substantial changes. On the basis of the latest Union Budget for 2024–2025, salaried employees can save up to Rs. 17,500 year in taxes.
- Increased Standard Deduction
For salaried individuals who have chosen the New Tax system, the standard deduction has been raised from Rs. 50,000 to Rs. 75,000.
- Family Pension
Section 57(iia) of the Income Tax Act of 1961 has raised the deduction for pensioners’ family pension from Rs. 15,000 to Rs. 25,000.
- NPS Contribution
Under Section 80CCD, the government raised the 10% deduction limit for employers’ National Pension System (NPS) payments to 14%.
- NPS – Vatsalya
A new program that the government intends to implement will let parents and guardians to make contributions to their minor children’s NPS accounts, which they can then convert to regular NPS once the minor reaches maturity.
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Different Types of Taxable Income in India
In India, the sources of income of taxpayers are divided into many divisions in order to compute income tax. The following are India’s five primary categories of taxable income.
- Income from Salaries
This term is used to categorise the money that an employee receives from their employer. This section also includes the pension that an individual receives once they retire. All of your salary income is detailed on Form 16. Consider using this form as evidence of your income and employment when you file your taxes.
- Income from Business or Profession
A person’s income from businesses, professions, and freelancing is taxable under this heading, following Sections 30 to 43D of the Income Tax Act. This category includes earnings from side projects or such occupations.
- Income from House Property
The Income Tax Act classifies as taxable any income received by an individual from the sale, lease, or rental of a residential property.
- Income from Capital Gains
Earnings from sources such as capital asset investments are taken into account in this category. Stocks, real estate, and mutual funds might all fall under this category. Additionally, this section separates your capital gains into two main groups according on how long you held them. Short-term capital gains (STCG) and long-term capital gains (LTCG) are these.
- Income from Other Sources
Finally, income from other sources is taxed if it does not fit into one of the four categories mentioned above. The following are some examples of sources of income that fall within this category.
- Gifts received from any TV show or programme
- Interests on FDs, saving bank accounts, etc
- Interests from securities, bonds and debentures
- Income from dividends
- Profits from gambling, horse races and lotteries
- Gifts from friends and families
- Pension a person receives after pensioner’s death
- Rental income from properties used for non-residential purposes
How to Calculate Income Tax with Tax Slabs?
For example, if your entire taxable income, including income from all sources such as interest, rent, and pay, is Rs. 8,00,000. Additionally, you are eligible for reduced deductions under Section 80, including Section 80D. The income tax with tax slabs under the new regime can be calculated using the following table:
| Income Tax Slabs | Tax Rate | Tax Amount |
| *Income up to Rs. 3,00,000 | No Tax | – |
| Income from Rs. 3,00,001 – Rs. 7,00,000 | 5% (Rs. 7,00,000 – Rs. 3,00,000) | Rs. 20,000 |
| Income from Rs. 7,00,001 to Rs. 10,00,000 | 10% (Rs. 8,00,000 – Rs. 7,00,000) | Rs. 10,000 |
| Income more than Rs. 10,00,001 | 15% | – |
| Tax | Rs. 30,000 | |
| Cess | 4% of Rs. 30,000 | Rs. 1,200 |
| Total Tax in FY 2024-25 (AY 2025-26) | Rs. 31,200 | |
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What is a Surcharge and what are the Rates?
The surcharge is the additional tax that is imposed when an individual’s income exceeds a certain threshold. Instead than being charged on wages, it is charged on the tax collected. For instance, under the previous system, you would have to pay Rs. 28,12,500 in taxes on an income of Rs. 1 crore. 10% of the tax amount, or Rs. 28,12,500, will be surcharged in this case, making the total Rs. 2,81,250. In India, the amount of the surcharge varies from income to income and is collected if the income above Rs. 50 lakh.
The following are the different surcharge rates under old tax regime:
- 10% of income tax when total income is greater than Rs. 50 lakh but upto Rs. 1 crore
- 15% of income tax when total income is greater than Rs. 1 crore but upto Rs. 2 crore
- 25% of income tax when total income is greater than Rs. 2 crore but upto Rs. 5 crore
- 37% of income tax when total income exceeds Rs. 5 crore
However, under the new tax system, the highest surcharge rate of 37% was lowered to 25% in Budget 2024.
Also, income from dividends and capital gains subject to sections 111A (Short Term Capital Gain on Shares), 112A (Long Term Capital Gain on Shares), and 115AD (Tax on Income of Foreign Institutional Investors) will not be subject to the 25% and 37% surcharge rates. As a result, it shows that a 15% surcharge will be applied to the tax due on such income.
In addition, if an Association of Persons (AOP) is made up completely of businesses, the surcharge fee will likewise be restricted to 15%. An additional health and education cess of 4% of the income tax liability must be paid by all assessee entities.
Deductions and Exemptions Under the New Tax Regime
A number of tax exemptions and deductions were allowed under the previous tax system. The new income tax slab structure does not allow for the majority of these deductions. The following are a few of the deductions permitted under the new tax structure.
- Transport allowances for differently-abled individuals
- Travelling allowance for transfer or employment
- Any investment done in favour of the National Pension Scheme under Section 80 CCD (1) and Section 80 CCD (2)
- Deductions for new employees under Section 80 JJAA
- Any other deduction under Section 32 of the Income Tax Act
- Gratuity Amount under Section 10(10)
- Gifts up to Rs. 5000
- Employer’s contribution to employee’s EPS account
- Additional employee costs under Section 80 JJA
- Voluntary retirement exemption under Section 10(10C)
Income chargeable to tax under sections 111A, 112A, and 115AD is not subject to the additional surcharge of 25% or 37%, as applicable. Therefore, the highest rate of tax surcharge that can be applied to these types of incomes is 15%.
15% is the highest rate of surcharge on tax that can be applied on dividend income or capital gains as defined by Section 112. For an Association of Persons (AOP) with all members acting as a firm, the surcharge rate is limited to 15%.
It should be mentioned that there is applicable marginal alleviation from the surcharge.
Consequences of Missing the Filing Deadline for FY 2024-25 & AY 2025-26
For Indian taxpayers, missing the Income Tax Return (ITR) filing date for AY 2025–2026 might have a number of consequences. If taxpayers miss the deadline, they may encounter the following problems.
- Penalties and Interest
A 1% monthly interest charge, or a portion of it, is applied to the outstanding tax amount for late filings under Section 234A of the Income Tax Act. Furthermore, returns submitted after the due date are subject to a late fee of Rs. 5,000 under Section 234F; this fee is lowered to Rs. 1,000 if the total income is less than Rs. 5 lakh.
- The incapacity to carry losses forward
The ability to carry forward specific losses, like those from capital gains or business ventures, to deduct from future income is lost by taxpayers who miss the deadline. In later years, it may lead to a larger tax obligation.
- Limitations on Tax Regime Selection
By filing a belated return, taxpayers lost the opportunity to choose the previous tax regime with its corresponding exemptions and deductions, forcing them to use the default new tax regime. Hence, it can lead to a higher tax outgo for individuals who would have benefited more under the prior regime.
- Legal Repercussions
The Income Tax Department may investigate persistent non-
compliance with tax filing obligations, and in extreme circumstances, prosecution may result. Thus, prompt filing is essential to avoiding these kinds of legal problems.
If a taxpayer misses the original deadline, they should file a belated return as soon as possible to avoid these penalties. The deadline for late AY 2025–2026 returns is December 31, 2024. It’s crucial to remember that submitting a return beyond the deadline does not avoid the penalties and interest that come with it.
| Particulars | Old Tax Regime | New Tax regime (until 31st March 2024) | New Tax Regime (From 1st April 2024) |
| Rs. 0 to Rs. 2,50,000 | Nil | Nil | Nil |
| Rs. 2,50,000 to Rs. 3,00,000 | 5% | 5% | Nil |
| Rs. 3,00,000 to Rs. 5,00,000 | 5% | 5% | 5% |
| Rs. 5,00,000 to Rs. 6,00,000 | 20% | 10% | 5% |
| Rs. 6,00,000 to Rs. 7,50,000 | 20% | 10% | 10% |
| Rs. 7,50,000 to Rs. 9,00,000 | 20% | 15% | 10% |
| Rs. 9,00,000 to Rs. 10,00,000 | 20% | 15% | 15% |
| Rs. 10,00,000 to Rs. 12,00,000 | 30% | 20% | 15% |
| Rs. 12,00,000 to Rs. 12,50,000 | 30% | 20% | 20% |
| Rs. 12,50,000 to Rs. 15,00,000 | 30% | 25% | 20% |
| More than Rs. 15,00,000 | 30% | 30% | 30% |
Read also: 10 Important Income Tax Form under Income Tax Act, 1961, One must know
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