The Union Budget 2025 has introduced significant changes to the income tax slabs which will come into effect from April 1, 2025. The new tax regime exempts incomes up to Rs.12 Lakh from any tax.
For salaried individuals who opt for the new tax regime, an income of up to Rs.12.75 Lakh will be tax-free, thanks to the increased standard deduction.
This restructuring is part of a broader effort to simplify the tax system and stimulate economic growth by increasing disposable income and encouraging consumer spending. Here are the new tax slabs according to the newest budget -
Up to Rs.4 Lakh | NIL |
|---|---|
Rs.4 - 8 Lakh | 5% |
Rs.8 - 12 Lakh | 10% |
Rs.12 - 16 Lakh | 15% |
Rs.16 - 20 Lakh | 20% |
Rs.20 - 24 Lakh | 25% |
Over Rs.24 Lakh | 30% |
Here are the highlights and features of the new income tax slabs from the Union Budget 2025:
The Union Budget 2025 has raised the tax exemption limit, meaning individuals with an annual income of up to Rs.12 Lakh will not have to pay any income tax.
For salaried individuals opting for the new tax regime, income up to Rs.12.75 Lakh will be tax-free due to an increased standard deduction.
The standard deduction limit was increased to Rs.75,000 from Rs.50,000 for those with income from salary or pension.
The standard deduction for family pensioners was increased to Rs.25,000 from Rs.15,000.
The deduction on the employer's contribution to the NPS account was increased to 14% from 10%.
The new tax regime is the default, but individuals can opt for the old regime if there is no business income.
From April 1, 2025, the basic exemption limit will be increased to Rs.4 Lakh from Rs.3 Lakh.
From April 1, 2025, the tax rebate will apply to taxable incomes up to Rs.12 Lakh, making them tax-free.
The highest surcharge rate for those earning above Rs.2 Crore remains at 25%.
Income tax slabs are used by the government to levy taxes on individual earnings based on specific income ranges. These income ranges are known as slabs. This system follows a progressive tax structure, meaning that as an individual's income increases, so does the rate at which it is taxed.
Each slab is assigned a particular tax rate, where lower income levels are taxed at lower rates and higher income levels are taxed at higher rates.
For instance, income up to a certain amount might be tax-exempt, serving as the basic exemption limit. Income beyond that is taxed in incremental bands at rates like 5%, 10%, 20%, or 30%, depending on the government's annual budget announcements.
Here are the key differences in the income tax slab rates between FY 2023-24 (AY 2024-25) and FY 2024-25 (AY 2025-26):
Both fiscal years have no tax for income up to Rs.3 Lakh.
The 15% tax rate now starts at Rs.10 Lakh instead of Rs.9 Lakh, with no change in rate but a new threshold for this slab.
For incomes ranging from Rs.12 Lakh to Rs.15 Lakh and above Rs.15 Lakh, the tax rates remain the same at 20% and 30%, respectively.
Income Tax Slabs for FY 2023-2 | Tax Rates (FY 2023-24) | Income Tax Slabs for FY 2024-25 | Tax Rates (FY 2024-25) | Changes |
|---|---|---|---|---|
Up to Rs.3,00,000 | NIL | Up to Rs.3,00,000 | NIL | No change |
Rs 3,00,000 - Rs.6,00,000 | 5% | Rs.3,00,000 - Rs.7,00,000 | 5% | Slab expanded by Rs.1 Lakh |
Rs 6,00,000 - Rs.9,00,000 | 10% | Rs 7,00,000 - Rs.10,00,000 | 10% | Slab expanded by Rs.1 Lakh |
Rs 9,00,000 - Rs.12,00,000 | 15% | Rs 10,00,000 - Rs.12,00,000 | 15% | New threshold |
Rs 12,00,000 - Rs.15,00,000 | 20% | Rs 12,00,000 - Rs.15,00,000 | 20% | No change |
Above Rs.15,00,000 | 30% | Above Rs.15,00,000 | 30% | No change |
The income tax slabs under the old tax regime remain the same for FY 2024-25 as they were in FY 2023-24. Here are the age-based exemption limits under the old tax regime:
Category | Income Range | Tax Rate (%) |
|---|---|---|
Individuals (Below 60 years) | Up to Rs.2,50,000 | 0% |
Rs.2,50,001 to Rs.5,00,000 | 5% | |
Rs.5,00,001 to Rs.10,00,000 | 20% | |
Above Rs.10,00,000 | 30% | |
Senior Citizens (60 to 80 years) | Up to 3,00,000 | 0% |
Rs.3,00,001 to Rs.5,00,000 | 5% | |
Rs.5,00,001 to Rs.10,00,000 | 20% | |
Above Rs.10,00,000 | 30% | |
Super Senior Citizens (80 years and above) | Up to Rs.5,00,000 | 0% |
Rs.5,00,001 to Rs.10,00,000 | 20% | |
Above Rs.10,00,000 | 30% |
Below is a comparison between the tax slabs under the new and old regimes:
Initial exemption
Both regimes provide tax exemption for income up to Rs.2,50,000.
Lower income brackets
The new tax regime offers more favorable terms for lower income brackets.
Rs.2,50,001 - Rs.3,00,000: The old tax regime taxes at 5%, while the new tax regime has no tax.
Middle income brackets
Rs.3,00,001 - Rs.5,00,000: Both regimes offer a 5% tax rate.
Rs.5,00,001 - Rs.7,00,000: The new regime maintains a lower 5% rate compared to 20% in the old regime.
Higher income brackets
Rs.7,00,001 - Rs.10,00,000: The new tax regime offers a lower rate of 10% compared to 20% in the old regime.
Rs.10,00,001 - Rs.12,00,000: The new tax regime rate is 15% versus 30% in the old regime.
Upper-middle income brackets
Rs.12,00,001 to Rs.15,00,000: The new tax regime rates vary from 15% to 20% while the old regime rates stay constant at 30%.
Highest income bracket
For income above Rs.15,00,000, both regimes apply a 30% tax rate.
Income Range | Old Tax Regime Rates | New Tax Regime Rates |
|---|---|---|
Up to Rs.2,50,000 | No Tax | No Tax |
Rs.2,50,001 - Rs.3,00,000 | 5% | No Tax |
Rs.3,00,001 - Rs.5,00,000 | 5% | 5% |
Rs.5,00,001 - Rs.6,00,000 | 20% | 5% |
Rs.6,00,001 - Rs.7,00,000 | 20% | 5% |
Rs.7,00,001 - Rs.9,00,000 | 20% | 10% |
Rs.9,00,001 - Rs.10,00,000 | 20% | 10% |
Rs.10,00,001 - Rs.12,00,000 | 30% | 15% |
Rs.12,00,001 - Rs.12,50,000 | 30% | 20% |
Rs.12,50,001 - Rs.15,00,000 | 30% | 20% |
Above Rs.15,00,000 | 30% | 30% |
The table below compares the new tax regime with the old tax regime. It summarizes when each tax regime may be more beneficial, considering income ranges and typical deductions.
Income Range | New Tax Regime | Old Tax Regime |
|---|---|---|
Up to Rs.12 Lakh | A tax rebate of Rs.60,000 significantly reduces tax liability. | Less appealing due to reliance on tax-saving deductions. |
Rs.12 Lakh to Rs.12.75 Lakh | More advantageous despite theoretical deductions and HRA under the old regime. | Requires use of maximum deductions (up to Rs.5.75 Lakh) and HRA is still not favorable compared to the new regime. |
Above Rs.12 Lakh till Rs.13.75 Lakh | Tax liability increases rapidly post Rs.12 Lakh. | More beneficial if Rs.5.25 Lakh is invested in savings; without HRA, liability is Rs.57,500 compared to Rs.75,000 in the new regime. |
Rs.13.75 Lakh to Rs.15.75 Lakh | Higher tax outgo compared to the old regime, especially without HRA. | Lower tax liability even without HRA if Rs.5.25 Lakh is invested. With HRA, this regime is preferable. |
Rs.15.75 Lakh + HRA > Rs.3 Lakh | The new regime is less compelling; the advantage depends on investment patterns. | The old regime is better if Rs.5.25 Lakh is invested in savings schemes. |
Rs.20 Lakh (Rs.20.75 Lakh salaried) | Offers better tax savings despite no deductions allowed; liability is Rs.2 Lakh. | Liable for Rs.2,40,000 with deductions, making the new regime more attractive. |
Rs.24 Lakh | Tax savings of Rs.60,000 despite not utilizing deductions. | Liability of Rs.3.60 Lakh post-deductions; new regime saves Rs.60,000. |
The Union Budget 2025 will come into effect from April 1, 2025, for the financial year 2025-26. The revamped income tax regime is designed to offer benefits to a wide range of taxpayers, particularly the middle class.
By exempting incomes up to Rs.12 Lakh from taxation the new regime significantly increases disposable income for individuals. This increase in take-home pay is expected to boost consumer spending, thereby stimulating economic growth. To read the budget and know more in detail, click here or here.
What is the new tax exemption limit under the Union Budget 2025?
Is the new tax regime mandatory for all taxpayers?
Do you need to file an ITR if your income is less than Rs.4 Lakh?
Was this information useful?