 "Budget 2025: How does the new income tax slab differ from the old regime?")
Finance Minister Nirmala Sitharaman is expected to present the Union Budget on February 1, with the salaried class anticipating greater income tax reliefs in the announcements. In her previous budget speech, Sitharaman introduced a revised tax structure under the new income tax regime, which took effect on April 1, 2024.
“It is expected that Budget 2025 is likely to continue the dual-option structure of the old and new income tax regimes, offering taxpayer flexibility to choose based on their financial preferences. The new regime is designed for simplicity, eliminating most deductions and exemptions. The new regime provides for lower tax rates but offers limited deduction. On the other hand, the old regime starts taxing incomes above Rs 2.5 lakh, but remains a lucrative option for taxpayers as it allows deductions under Chapter VI-A under sections like 80C, 80D, 80E, 80CCC, 80CCD, etc., exemptions for house rent, education loans, and more,” said Sandeep Chilana, managing partner, CCLaw.
The tax rates under both new and old tax regimes are compared as below:
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| Old Tax Regime (FY 2022-23, FY 2023-24 and FY 2024-25) | New Tax Regime | |||||
| Income Slabs | Age < 60 years & NRIs | Age of 60 Years to 80 years | Age above 80 Years | FY 2022-23 | FY 2023-24 | FY 2024-25 |
| Up to ₹2,50,000 | NIL | NIL | NIL | NIL | NIL | NIL |
| ₹2,50,001 - ₹3,00,000 | 5% | NIL | NIL | 5% | NIL | NIL |
| ₹3,00,001 - ₹5,00,000 | 5% | 5% | NIL | 5% | 5% | 5% |
| ₹5,00,001 - ₹6,00,000 | 20% | 20% | 20% | 10% | 5% | 5% |
| ₹6,00,001 - ₹7,00,000 | 20% | 20% | 20% | 10% | 10% | 5% |
| ₹7,00,001 - ₹7,50,000 | 20% | 20% | 20% | 10% | 10% | 10% |
| ₹7,50,001 - ₹9,00,000 | 20% | 20% | 20% | 15% | 10% | 10% |
| ₹9,00,001 - ₹10,00,000 | 20% | 20% | 20% | 15% | 15% | 10% |
| ₹10,00,001 - ₹12,00,000 | 30% | 30% | 30% | 20% | 15% | 15% |
| ₹12,00,001 - ₹12,50,000 | 30% | 30% | 30% | 20% | 20% | 20% |
| ₹12,50,001 - ₹15,00,000 | 30% | 30% | 30% | 25% | 20% | 20% |
| ₹15,00,000 and above | 30% | 30% | 30% | 30% | 30% | 30% |
Rajarshi Dasgupta, Executive Director - Tax, AQUILAW explains deductions available
Salary income: The standard deduction of Rs 50,000, which was only available under the old regime, has now been extended to the new tax regime as well. This amount has been increased to Rs 75,000 for the new regime only with effect from FY 2024-25.
Family pension: Those receiving a family pension can claim a deduction of Rs 15,000 or 1/3rd of the pension, whichever is lower. This amount has been increased to Rs 25,000 for the new regime with effect from FY 2024-25.
Reduced surcharge for high net worth individuals: The surcharge rate on income over Rs 5 crores has been reduced from 37 per cent to 25 per cent. This move will bring down their effective tax rate from 42.74 per cent to 39 per cent.
Higher leave encashment exemption: The exemption limit for non-government employees has been raised from Rs 3 lakhs to Rs 25 lakhs, an 8-fold increase.
“If one has an objective of increasing disposable income in hand while enjoying lower tax rates, new tax regime is advisable. And if one has space for investing in tax saving instruments, then the old tax regime can be availed,” said Sujit Sudhakar Bangar, founder at TaxBuddy.com.
Starting from the financial year 2023-24, the new income tax regime will be set as the default option. If you want to continue using the old regime, you must submit the income tax return along with Form 10-IEA before the due date. You will have the option to switch between the two regimes annually to check the tax benefits.