 |
| Income Tax Slab in 2024-25 |
Understanding the income tax slab is crucial for every taxpayer in India. It helps you know how much tax you need to pay and how you can plan your finances better. The income tax slabs are usually revised in the Union Budget every year, and for the financial year 2024-25, there are a few key things you need to know.
Let’s break down the income tax slabs for this year in simple terms, so you can easily understand where you stand and how much tax you might need to pay.
What Are Income Tax Slabs?
Income tax slabs are the ranges of income that are taxed at different rates. In India, the income tax system is progressive, which means that higher income levels are taxed at higher rates. The government sets different tax rates for different income groups to ensure that those who earn more pay a higher percentage of their income as tax.
For the financial year 2024-25, there are two main tax regimes: the Old Tax Regime and the New Tax Regime. You can choose between these two depending on which one suits you better.
Old Tax Regime vs. New Tax Regime
Before we dive into the slabs, it’s important to understand the difference between the Old Tax Regime and the New Tax Regime.
Old Tax Regime: This regime allows you to claim various deductions and exemptions, such as under Section 80C, 80D, House Rent Allowance (HRA), and more. However, the tax rates are higher compared to the new regime.
New Tax Regime: This regime offers lower tax rates but does not allow most deductions and exemptions. It’s simpler but may not be beneficial for everyone, especially if you have many deductions to claim.
Income Tax Slabs for FY 2024-25
Here’s a quick look at the income tax slabs under both the Old Tax Regime and the New Tax Regime for the financial year 2024-25.
Old Tax Regime:
- Income up to ₹2.5 lakh: No tax
- Income between ₹2.5 lakh to ₹5 lakh: 5% tax
- Income between ₹5 lakh to ₹10 lakh: 20% tax
- Income above ₹10 lakh: 30% tax
Note: Under the Old Tax Regime, if your income is up to ₹5 lakh, you can claim a rebate under Section 87A, effectively reducing your tax liability to zero.
New Tax Regime:
- Income up to ₹2.5 lakh: No tax
- Income between ₹2.5 lakh to ₹5 lakh: 5% tax
- Income between ₹5 lakh to ₹7.5 lakh: 10% tax
- Income between ₹7.5 lakh to ₹10 lakh: 15% tax
- Income between ₹10 lakh to ₹12.5 lakh: 20% tax
- Income between ₹12.5 lakh to ₹15 lakh: 25% tax
- Income above ₹15 lakh: 30% tax
Note: The New Tax Regime is beneficial for those who do not have many deductions or exemptions to claim. It offers lower tax rates but does not allow most tax-saving investments or expenses to be deducted from your income.
Which Tax Regime Should You Choose?
Choosing between the Old and New Tax Regime depends on your financial situation. If you have several deductions, such as investments in PPF, insurance premiums, or home loan interest, the Old Tax Regime might be more beneficial for you. On the other hand, if you prefer a simpler tax structure with lower rates and don’t have many deductions, the New Tax Regime could be the right choice.
Here’s a quick way to decide:
If you have deductions/exemptions: Calculate your taxable income under the Old Regime after claiming all your deductions. Compare the tax payable under both regimes and choose the one with the lower tax liability.
If you don’t have deductions/exemptions: The New Tax Regime is likely more beneficial because of its lower rates.
Additional Points to Consider
Rebate under Section 87A: If your total income is up to ₹5 lakh, you are eligible for a rebate under Section 87A. This rebate is available under both regimes and can reduce your tax liability to zero.
Surcharge and Cess: If your income exceeds certain thresholds, additional surcharge and cess may apply, increasing your tax liability.
Standard Deduction: Under the Old Tax Regime, a standard deduction of ₹50,000 is available to salaried individuals. This is not available in the New Tax Regime.
Conclusion
The income tax slabs for 2024-25 offer flexibility for taxpayers to choose the regime that best suits their financial situation. Whether you opt for the Old Tax Regime with its deductions and exemptions or the New Tax Regime with lower rates and simplicity, the key is to plan your taxes carefully.
Remember, income tax planning is not just about saving money; it’s about managing your finances in a way that aligns with your life goals. Take the time to evaluate your options, consider your deductions, and choose the regime that helps you make the most of your hard-earned money.