New Tax Regime Vs Old Tax Regime: In the general budget to be presented on February 1, people will be most waiting for the announcements related to income tax. If reports are to be believed, in this budget, some relief in income tax can be given to people with an annual income of up to Rs 15 lakh. Let us know what are the current income tax rates and slabs under the new tax regime and old tax regime.
Current Tax Slabs under New Tax Regime for Financial Year 2024-25
The new tax regime introduced in Budget 2020 offers lower tax rates along with fewer exemptions and deductions.
- For income up to Rs 3,00,000: Nil
- For income between Rs 3,00,001 and Rs 7,00,000: 5%
- For income between Rs 7,00,001 and Rs 10,00,000: 10%
- For income between Rs 10,00,001 and Rs 12,00,000: 15%
- For income between Rs 12,00,001 and Rs 15,00,000: 20%
- For income above Rs 15,00,000: 30%
This is the default tax regime. Under this regime, taxpayers can opt for lower rates but will have to forgo exemptions like HRA, LTA and deductions under sections 80C, 80D and others.
Standard deduction limit increased to Rs 75,000
However, taxpayers can avail standard deduction. In Budget 2024-25, the limit of standard deduction for salaried employees was increased to Rs 75,000. At the same time, it was increased to Rs 25,000 for family pensioners.
Current tax slabs under the old tax regime (for financial 2024-25)
The old tax regime, while retaining higher rates, allows taxpayers to claim various exemptions and deductions.
- For income up to Rs 2,50,000: Nil
- For income between Rs 2,50,001 and Rs 7,00,000: 5%
- For income between Rs 7,00,001 and Rs 10,00,000: 10%
- For income between Rs 10,00,001 and Rs 12,00,000: 15%
- For income between Rs 12,00,001 and Rs 15,00,000: 20%
- For income above Rs 15,00,000: 30%
For senior citizens aged 60-80 years, the basic exemption limit is Rs 3,00,000. For super senior citizens, i.e. those above 80 years, it is Rs 5,00,000.
- The old tax regime allowed tax deductions under various sections, such as:
- Under Section 80C, you can save tax on an amount up to Rs 1.5 lakh through investments like PPF, ELSS and LIC premium.
- Deduction on health insurance premium under section 80D
- Under Section 24(b), a deduction of up to Rs 2,00,000 can be claimed on interest paid on home loan.
- Other exemptions like HRA and LTA
How to choose the right tax regime
Choosing between the new and old tax regime will be beneficial for you, depends on your financial profile. The new tax regime is more suitable for those who invest very little. On the contrary, the old tax regime is suitable for those taxpayers who invest wisely and know how to take maximum advantage of the exemptions and deductions available on it.
