Understanding Income Tax Slabs in India (FY 2024-25): Old vs New Regime

The New Tax Regime, which became the default option from FY 2023-24, offers lower tax rates compared to the Old Regime but comes with a significant trade-off: you cannot claim most exemptions and deductions. This regime is designed for simplicity—fewer calculations, less paperwork, and straightforward tax computation.

Here's the complete tax slab structure for FY 2024-25 under the New Tax Regime:

• Up to ₹3,00,000: Nil (No tax)
• ₹3,00,001 to ₹6,00,000: 5% of income exceeding ₹3,00,000
• ₹6,00,001 to ₹9,00,000: ₹15,000 + 10% of income exceeding ₹6,00,000
• ₹9,00,001 to ₹12,00,000: ₹45,000 + 15% of income exceeding ₹9,00,000
• ₹12,00,001 to ₹15,00,000: ₹90,000 + 20% of income exceeding ₹12,00,000
• Above ₹15,00,000: ₹1,50,000 + 30% of income exceeding ₹15,00,000

Additionally, under Section 87A, taxpayers with income up to ₹7,00,000 can claim a rebate that effectively makes their tax liability zero. This means if your total income is ₹7,00,000 or less, you pay no tax under the New Regime (though cess still applies).

The New Regime is ideal if you don't have significant investments in tax-saving instruments like PPF, ELSS, or life insurance, or if you don't receive HRA or have a home loan. It's particularly beneficial for young professionals who haven't yet started investing heavily or those who prefer simplicity over tax optimization.

The Old Tax Regime has been around for decades and allows taxpayers to claim various deductions and exemptions that can significantly reduce taxable income. While the tax rates are higher, the ability to claim deductions often results in lower actual tax liability for those who invest in tax-saving instruments.

Tax slabs under the Old Tax Regime for FY 2024-25:

• Up to ₹2,50,000: Nil (₹3,00,000 for senior citizens aged 60-80; ₹5,00,000 for super senior citizens above 80)
• ₹2,50,001 to ₹5,00,000: 5% of income exceeding ₹2,50,000
• ₹5,00,001 to ₹10,00,000: ₹12,500 + 20% of income exceeding ₹5,00,000
• Above ₹10,00,000: ₹1,12,500 + 30% of income exceeding ₹10,00,000

Under Section 87A, taxpayers with income up to ₹5,00,000 can claim a rebate making their tax liability zero.

The real advantage of the Old Regime lies in the deductions you can claim: Section 80C (₹1.5 lakh for PPF, ELSS, life insurance, etc.), Section 80D (up to ₹25,000 for health insurance), HRA exemption, home loan interest deduction (up to ₹2 lakh), and many more. If you're already investing in these instruments or have these expenses, the Old Regime often works out cheaper despite higher base rates.

There's no universal answer—the right choice depends on your individual circumstances. Here's how to decide:

Choose the New Tax Regime if:

• Your total deductions and exemptions are less than ₹2-2.5 lakhs annually
• You don't receive HRA or don't live in rented accommodation
• You don't have a home loan
• You prefer simplicity and don't want to track multiple investments for tax purposes
• You're a young professional just starting your career

Choose the Old Tax Regime if:

• You claim HRA exemption (especially in metro cities where rent is high)
• You have a home loan and claim interest deduction
• You regularly invest in 80C instruments (PPF, ELSS, life insurance, etc.)
• Your total deductions and exemptions exceed ₹2.5 lakhs
• You have other deductions like 80D (health insurance), 80G (donations), etc.

The best approach? Use our Income Tax Calculator to calculate your tax liability under both regimes with your actual income and deductions. The calculator will show you exactly which regime saves you more money, taking the guesswork out of this important decision.

Beyond the basic tax slabs, you need to understand rebates and surcharges that affect your final tax liability:

Section 87A Rebate: This is a tax rebate (not deduction) that reduces your tax liability to zero if your total income is below certain thresholds—₹7 lakhs for New Regime and ₹5 lakhs for Old Regime. This is particularly beneficial for middle-income taxpayers.

Surcharge: If your income exceeds ₹50 lakhs, an additional surcharge applies on top of your tax. The surcharge rate increases with income: 10% for income between ₹50 lakhs and ₹1 crore, 15% for ₹1-2 crores, 25% for ₹2-5 crores, and 37% above ₹5 crores. This significantly increases the effective tax rate for high earners.

Health and Education Cess: A 4% cess is levied on the total tax amount (including surcharge) for all taxpayers. This is used to fund health and education initiatives.

Understanding these components helps you calculate your true tax liability and plan accordingly.

Smart tax planning goes beyond just choosing the right regime. Here are strategies to minimize your tax burden legally:

Maximize 80C Investments: If you're in the Old Regime, ensure you're utilizing the full ₹1.5 lakh limit through PPF, ELSS mutual funds, life insurance, or NSC. ELSS funds offer the dual benefit of tax savings and potential market-linked returns.

Claim All Eligible Deductions: Don't miss out on 80D (health insurance), 80E (education loan interest), 80G (donations), and other applicable deductions. Keep all receipts and documentation organized.

Optimize HRA: If you receive HRA, ensure you're claiming the exemption correctly. Keep rent receipts and rental agreements as proof.

Plan Your Salary Structure: Work with your employer to structure your CTC tax-efficiently. Components like meal coupons, LTA, and telephone reimbursements can be tax-exempt within limits.

Review Annually: Your optimal tax regime might change as your income and investments evolve. Review your choice every financial year and switch if beneficial (salaried individuals can switch annually; business owners have restrictions).