Finance Minister Nirmala Sitharaman has introduced revisions to the income tax slabs under the new tax regime in the Budget 2024. These changes are retroactively effective from April 1, 2024, for the current financial year, 2024-25. The modifications to the income tax slabs were announced in July 2024, following the presentation of the full budget after the Lok Sabha elections. It’s important to note that no changes were made in the interim budget presented in February 2024.
While the new tax regime saw alterations, only two tax slabs have been updated. The upper limits of these two slabs have been increased by ₹1 lakh. Specifically, the income tax slab for earnings between ₹3 lakh and ₹6 lakh has now been revised to ₹3 lakh to ₹7 lahks, and the slab for ₹6 lahks to ₹9 lahks has been adjusted to ₹7 lakh to ₹10 lakh. This means individuals earning ₹7 lakh will now be taxed at 5% instead of the previous 10%, and those earning ₹10 lakh will face a 10% tax rather than 15%.
Revised Income Tax Slabs Under the New Tax Regime
The updated income tax slabs for the new tax regime are as follows:
- ₹0 – ₹3,00,000: 0%
- ₹3,00,001 – ₹7,00,000: 5%
- ₹7,00,001 – ₹10,00,000: 10%
- ₹10,00,001 – ₹12,00,000: 15%
- ₹12,00,001 – ₹15,00,000: 20%
- ₹15,00,001 and above: 30%
In addition to the changes in the income tax slabs, the Finance Minister has also made adjustments to the standard deduction limit and the employer’s contribution to employees’ NPS accounts within the new tax regime. Furthermore, the standard deduction available for family pensioners has been modified as well. However, no changes have been made to other aspects, such as the tax rebate available under Section 87A or the surcharge rate applicable for incomes exceeding ₹50 lakh.
The new tax regime continues to offer a tax rebate of up to ₹25,000 for taxable incomes not exceeding ₹7 lakh. Additionally, there has been no alteration to the surcharge for those earning over ₹2 crore.
These changes aim to make the new tax regime more appealing to taxpayers. However, the old tax regime remains unchanged, and its income tax slabs, rates, and other rules continue to apply.
Understanding the Differences Between Old and New Tax Regimes
The old tax regime maintains its previous structure, meaning that the higher deductions available in the new regime for standard deductions and employer contributions will not apply. Furthermore, the old regime still offers a tax rebate of ₹12,500 for taxable incomes not exceeding ₹5 lakh.
The primary distinction between the old and new tax regimes lies in the availability of typical deductions and tax exemptions. The new tax regime does not allow common deductions, such as:
- Section 80C: Deduction up to ₹1.5 lakh for specified investments and expenses.
- Section 80D: Deduction for health insurance premiums, up to ₹25,000 or ₹50,000.
- Section 80TTA: Deduction of up to ₹10,000 for interest earned from savings accounts in banks and post offices.
Basic Exemption Limits Under the Old Tax Regime
The taxpayer’s age determines the basic income exemption limits under the old tax regime:
- Individuals below 60 years: ₹2.5 lakh.
- Senior citizens aged 60 years and above, but below 80 years: ₹3 lakh.
- Super senior citizens aged 80 years and above: ₹5 lakh.
Currently, the new tax regime is the default option for taxpayers. Individuals who wish to opt for the old tax regime must specifically choose it while filing their income tax returns. When the new tax regime was introduced in FY 2020-21, it was presented as an optional regime with lower tax rates compared to the old tax structure. If individuals choose the new tax regime, they can claim only two deductions: the standard deduction of ₹50,000 from salary or pension income and Section 80CCD(2) for the employer’s contribution to the employee’s NPS account.
For individual taxpayers without business income, a choice between the two regimes is required every financial year. Currently, a taxpayer with business income wishing to continue with the old tax regime must explicitly opt for it. Once selected, they have a one-time opportunity to switch to the new tax regime. If they opt for the new tax regime, they cannot revert to the old tax regime again.
In the Budget 2024, Finance Minister Nirmala Sitharaman announced revisions to the income tax slabs under the new tax regime for the financial year 2024-25 (Assessment Year 2025-26). These adjustments included an increase in the upper limit of two tax slabs by ₹1 lakh each. Specifically, the slab for income between ₹3 lahks and ₹6 lahks has been revised to ₹3 lakh to ₹7 lahks, while the slab for ₹6 lakh to ₹9 lakh has been changed to ₹7 lakh to ₹10 lakh.
The adjustments aim to make the new tax regime more appealing compared to the old tax regime. In February 2023, additional changes were introduced to enhance the attractiveness of the new tax regime for individual taxpayers. Notable modifications included the introduction of a standard deduction, an increase in the basic exemption limit, and an increase in the tax rebate under Section 87A for taxable incomes up to ₹7 lakh.
New Income Tax Slabs Under the New Tax Regime for FY 2024-25
Here are the updated income tax slabs for the new tax regime:
| Income Tax Slabs (₹) | Income Tax Rate (%) |
| From 0 to 3,00,000 | 0 |
| From 3,00,001 to 7,00,000 | 5 |
| From 7,00,001 to 10,00,000 | 10 |
| From 10,00,001 to 12,00,000 | 15 |
| From 12,00,001 to 15,00,000 | 20 |
| From 15,00,001 and above | 30 |
Changes Made in the New Tax Regime
In addition to modifying the income tax slabs, several key changes were announced in the new tax regime:
- Standard Deduction: The standard deduction limit for individual taxpayers with salary or pension income has been increased from ₹50,000 to ₹75,000.
- Family Pensioners: The standard deduction limit for family pensioners has been raised from ₹15,000 to ₹25,000.
- Employer’s Contribution to NPS: The deduction available on the employer’s contribution to the NPS account has increased from 10% to 14%.
Features of the New Tax Regime
- The new tax regime is the default option for taxpayers, who can opt for the old tax regime if they do not have business income.
- The basic exemption limit is set at ₹3 lakh for all individual taxpayers, regardless of age.
- The tax rebate under Section 87A allows for zero tax liability for taxable incomes up to ₹7 lakh.
- The highest surcharge rate for those earning more than ₹2 crore is 25%.
Income Tax Slabs Under the New Tax Regime for FY 2023-24 (AY 2024-25)
For individuals filing their income tax returns for the previous financial year 2023-24, the income tax slabs under the new tax regime were as follows:
| Income Tax Slabs (₹) | Income Tax Rate (%) |
| From 0 to 3,00,000 | 0 |
| From 3,00,001 to 6,00,000 | 5 |
| From 6,00,001 to 9,00,000 | 10 |
| From 9,00,001 to 12,00,000 | 15 |
| From 12,00,001 to 15,00,000 | 20 |
| From 15,00,001 and above | 30 |
Comparison of Old Tax Regime and New Tax Regime
Here’s a comparison of the income tax slabs and features under the old and new tax regimes:
| Feature | Old Tax Regime | New Tax Regime |
| Basic Exemption Limit | ₹2,50,000 (below 60 years) | ₹3,00,000 (all individuals) |
| ₹3,00,000 (60 years and above) | ||
| ₹5,00,000 (80 years and above) | ||
| Income Tax Slabs | From 0 to 2,50,000: 0% | From 0 to 3,00,000: 0% |
| From 2,50,001 to 5,00,000: 5% | From 3,00,001 to 7,00,000: 5% | |
| From 5,00,001 to 10,00,000: 20% | From 7,00,001 to 10,00,000: 10% | |
| From 10,00,001 and above: 30% | From 10,00,001 to 12,00,000: 15% | |
| From 12,00,001 to 15,00,000: 20% | ||
| From 15,00,001 and above 30% | ||
| Deductions and Exemptions | Multiple deductions available | Limited deductions available |
| (e.g., Section 80C, 80D, etc.) | Standard deduction only | |
| Rebate under Section 87A | ₹12,500 for income up to ₹5,00,000 | Zero tax for income up to ₹7,00,000 |
| Surcharge Rate | Varies by Income | Highest surcharge for income above ₹2 crore is 25% |
The revisions in the income tax slabs for FY 2024-25 aim to make the new tax regime more attractive and beneficial for individual taxpayers. Taxpayers can navigate their finances more effectively with increased basic exemption limits, standard deductions, and other enhancements. By understanding the differences between the old and new tax regimes, individuals can make informed decisions about their tax planning for the upcoming financial year.