Old vs New Regime Tax Rates FY 2024-25 & AY 2025-26

Posted on Thursday, September 19th, 2024 | By IndusInd Bank

Understanding the income tax slab rates is essential for every taxpayer. For the financial year 2024-25, the Government of India has outlined distinct tax slabs under both, the old and new tax regimes. This article provides a comprehensive overview of these slabs, helping you make informed decisions about your tax planning.

What Changes Were Announced in Income Tax Slabs in the New Tax Regime in Budget 2024?

In the Union Budget 2024, the finance minister introduced significant changes to the new income tax regime. These revisions include updated income tax slabs for the fiscal year 2024-25. The standard deduction, which lowers the taxable income, increased from ₹50,000 to ₹75,000. Moreover, the income threshold for the 5% tax rate under the new regime is raised from ₹6 lakh to ₹7 lakh, allowing more individuals to benefit from the lower tax rate.

Income Tax Slabs Under New Tax Regime for FY 2024-25

Income Tax Slabs under the new regime for FY 2024-25 are as below:

Old vs. New Regime Tax Rates (Income Tax Slabs FY 2023-24 and FY 2024-25)

Conditions for Opting for the New Tax Regime

Taxpayers opting for the new regime must forgo certain deductions and exemptions available under the old regime.

Common Deductions & Exemptions Not Allowed:

• Leave Travel Allowance (LTA)
• Conveyance Allowance
• House Rent Allowance (HRA)
• Relocation Allowance
• Children Education Allowance
• Professional Tax
• Daily Expenses in the Course of Employment
• Helper Allowance
• Deductions under Chapter VI-A (e.g., 80C, 80D, 80E), except for Section 80CCD(2)
• Interest on Housing Loan for self-occupied/vacant property (Section 24)
• Other Special Allowances (Section 10(14))

What Exemptions/Deductions Are Not Available Under the New Tax Regime in FY 24-25?

The 2020 budget significantly revised the tax structure by eliminating about 70 of the 100 exemptions previously available. Opting for the new income tax slabs for FY 2024-25 means forgoing several key exemptions and deductions, including:

• Leave Travel Allowance (LTA): The deduction for travel expenses while on leave, previously available under Section 10(5), is no longer allowed.
• House Rent Allowance (HRA): This allowance, which helped reduce taxable income for rent payments, is no longer deductible under Section 10(13A).
• Tax-Free Perquisites: Benefits like food coupons and other tax-free allowances that were previously exempt are now taxable.
• Chapter VI-A Deductions: Significant deductions such as Section 80C (investments), 80D (medical insurance), and 80TTA (savings interest) are not available.
• Home Loan Interest Deduction: The deduction for interest paid on home loans for self-occupied property under Sections 24(b) and 80EEA is no longer available.
• Specific Allowances: Allowances such as conveyance and children’s education, previously exempt under Section 10(14), are not deductible.

What Exemptions/Deductions Are Available Under the New Tax Regime in FY 24-25?

Under the new income tax slabs for FY 2024-25, taxpayers can still avail themselves of certain deductions and exemptions, despite the removal of many previously available ones. These include:

• NPS Contributions by Employer: Contributions to the National Pension System (NPS) by an employer, up to 10% of the salary of the employee (and 14% for Central Government employees), are deductible under Section 80CCD(2).
• Standard Deduction on Rental Income: For rented-out property, a standard deduction of 30% of the net rental income is allowed, simplifying the calculation of taxable income from house property.
• Home Loan Interest: Interest paid on a home loan for a let-out property can be deducted from the rental income earned, although a loss from house property for self-occupied/vacant property cannot be offset against other income heads.
• Transport Allowance for Divyang Employees: Divyang (disabled) employees are eligible for a transport allowance exemption to cover daily travel expenses between their workplace and home.
• Conveyance Allowance: Expenses incurred on conveyance for official duties are permissible as a conveyance allowance.
• Allowances for Travel and Transfer: Allowances provided to employees for the costs associated with travel on tour or transfer are exempt.
• Daily Allowance: A daily allowance received to cover ordinary day-to-day expenses while away from the normal place of duty is also allowed.

In conclusion, understanding the income tax slabs for FY 2024-25 in the new and old tax regimes helps individuals know their tax obligations. Choosing between the new and old regimes depends on factors like income, available deductions, and financial goals. The new regime offers lower tax rates with fewer deductions, while the old regime has higher tax rates but allows for more deductions.

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Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.