Budget 2025: Income Tax Slabs for FY 2025-26 – Comparing Old and New Tax Regimes
By: Admin
Date: January 14, 2025
Category: Budget 2025-26
Reading Time: 4 Minutes
Introduction
The Finance Act 2024 brought significant changes to the income tax system, amending Section 115BAC. The new tax regime is now the default for individuals, Hindu Undivided Families (HUF), Association of Persons (AOP), Body of Individuals (BOI), and Artificial Juridical Persons (except cooperative societies).
While this regime offers lower tax rates with limited exemptions, taxpayers can still opt for the old regime, which provides various deductions and exemptions.
Choosing Between Old and New Tax Regimes
1. For Non-Business Cases
Taxpayers without business income can choose their preferred regime each year by selecting it in their Income Tax Return (ITR). However, the ITR must be filed before the due date under Section 139(1).
2. For Business and Professional Income
For those with business or professional income, the new regime is the default.
- To opt out, taxpayers need to submit Form 10-IEA before the due date under Section 139(1).
- Switching regimes (old to new or vice versa) is allowed only once in a lifetime.
Key Differences Between Old and New Tax Regimes
The main differences lie in tax slabs and the availability of deductions and exemptions.
Comparison of Tax Slabs
| Income Slab | Old Regime (With Deductions) | New Regime (Without Deductions) |
|---|---|---|
| Up to ₹2,50,000 | Nil | Nil |
| ₹2,50,001–₹5,00,000 | 5% | 5% |
| ₹5,00,001–₹7,50,000 | 20% | 10% |
| Above ₹7,50,000 | 30% | 15% |
Key Features and Benefits
1. Standard Deduction on Salary
The new regime now includes a standard deduction of ₹50,000 (previously exclusive to the old regime). From FY 2024-25, this deduction has increased to ₹75,000 for the new regime.
2. Rebate Under Section 87A
Old Regime: A rebate of up to ₹12,500 for residents with total income not exceeding ₹5,00,000.
New Regime: A rebate of up to ₹25,000 for residents with total income not exceeding ₹7,00,000.
Which Tax Regime is Better?
Choosing the right tax regime depends on individual circumstances:
- Old Regime: Suitable for taxpayers with significant deductions like housing loans or investments.
- New Regime: Ideal for taxpayers with fewer deductions, as it offers lower tax rates.
To determine the best option, taxpayers can use the Income Tax Calculator available on the official Income Tax Portal.
Looking Ahead to Union Budget 2025
Taxpayers are eagerly awaiting reforms in the upcoming Union Budget 2025, including:
- Increased standard deductions.
- Higher tax rebates.
- Simplified tax systems for better financial relief.
Stay tuned for the Finance Minister’s announcements on February 1, 2025, to understand how the tax landscape will evolve for FY 2025-26.
