income tax
Published on 9 April 2025
Understanding Income Tax Regimes: Old vs New for 2024-25
Introduction
As taxpayers approach the deadline for filing their income tax returns for the assessment year 2024-25, it is vital to grasp the nuances of both the old and new tax regimes. This article outlines essential components such as deductions, set-offs, and relevant rules to assist taxpayers in making informed choices regarding their Income Tax Returns.
Overview of Tax Regimes
The new tax regime, introduced under Section 115 BAC, came into effect on April 1, 2020, applicable from the financial year 2020-21. During the Union Budget 2023, Union Finance Minister Nirmala Sitharaman announced that the new tax regime would serve as the default option for taxpayers who do not indicate a preference.
Taxpayers now have two choices for taxation. It is essential for every taxpayer to familiarize themselves with these options before submitting their income tax return. Below are the tax rates for the assessment year 2024-25.
Tax Rates for Assessment Year 2024-25
Old Regime Tax Rates for Individuals, HUF, AOP, BOI, & Artificial Juridical Persons
| S.No. | Net Total Income/Slab Pool | Income Tax Rate |
|---|---|---|
| 1 | Up to ₹2,50,000 | Nil |
| 2 | ₹2,50,001 to ₹5,00,000 | 5% |
| 3 | ₹5,00,001 to ₹10,00,000 | 20% |
| 4 | Above ₹10,00,000 | 30% |
Tax Rates for Senior Citizens (Resident Individuals aged 60 and above)
| S.No. | Net Total Income/Slab Pool | Income Tax Rate |
|---|---|---|
| 1 | Up to ₹3,00,000 | Nil |
| 2 | ₹3,00,001 to ₹5,00,000 | 5% |
| 3 | ₹5,00,001 to ₹10,00,000 | 20% |
| 4 | Above ₹10,00,000 | 30% |
Tax Rates for Super Senior Citizens (Resident Individuals aged 80 and above)
| S.No. | Net Total Income/Slab Pool | Income Tax Rate |
|---|---|---|
| 1 | Up to ₹5,00,000 | Nil |
| 2 | ₹5,00,001 to ₹10,00,000 | 20% |
| 3 | Above ₹10,00,000 | 30% |
Section 87A: Rebate
Rebate is applicable solely for resident individuals with total income up to ₹5,00,000:
- 100% of the tax payable or ₹12,500, whichever is lower.
Note: This rebate is deducted before the addition of HEC cess and is available against all types of income except LTCG under Section 112A.
Surcharge for Individuals, HUF, AOP, BOI, & Artificial Juridical Persons
| S.No. | Total Income | Income Tax Rate |
|---|---|---|
| 1 | Up to ₹50,00,000 | Nil |
| 2 | ₹50,00,001 to ₹1,00,00,000 | 10% |
| 3 | ₹1,00,00,001 to ₹2,00,00,000 | 15% |
| 4 | ₹2,00,00,001 to ₹5,00,00,000 | 25% |
| 5 | Above ₹5,00,00,000 | 37% |
Section 115BAC: New Tax Regime
The new tax regime allows individuals to benefit from a standard deduction and provides a full rebate for those earning up to ₹7,00,000 annually. The details are as follows:
Tax Rates Under Section 115BAC for Individuals, HUF, AOP, BOI & Artificial Juridical Persons
| S.No. | Total Income/Slab Pool | Income Tax Rate |
|---|---|---|
| 1 | Up to ₹3,00,000 | Nil |
| 2 | ₹3,00,001 to ₹6,00,000 | 5% |
| 3 | ₹6,00,001 to ₹9,00,000 | 10% |
| 4 | ₹9,00,001 to ₹12,00,000 | 15% |
| 5 | ₹12,00,001 to ₹15,00,000 | 20% |
| 6 | Above ₹15,00,000 | 30% |
Surcharge under Section 115BAC
| S.No. | Total Income | Income Tax Rate |
|---|---|---|
| 1 | Up to ₹50,00,000 | Nil |
| 2 | ₹50,00,001 to ₹1,00,00,000 | 10% |
| 3 | ₹1,00,00,001 to ₹2,00,00,000 | 15% |
| 4 | Above ₹2,00,00,000 | 25% |
Important Points Regarding Section 115BAC:
- If no tax regime is chosen, the ITR for assessment year 2024-25 will automatically be filed under the new regime.
- Assessees without business income can opt between the old and new regimes, choosing the option that maximizes benefits.
- If the assessee has business/professional income, their choice of regime is binding for subsequent assessment years, with the option to withdraw only once for the previous year.
- Assessees opting for Section 115BAC are exempt from Alternative Minimum Tax (AMT).
- Deductions under Chapter VI-A are generally not allowed, except for specific sections: 80JJAA, 80CCD(2), 80CCH(2), and 80LA.
- For assessees with business income opting for 115BAC for the first time, unabsorbed additional depreciation will be added to the opening WDV of fixed asset blocks as of April 1, 2023.
- Section 87A Rebate: Available only for resident individuals with total income up to ₹7,00,000—100% of the tax payable or ₹25,000, whichever is lower.
- Marginal Relief: If total income exceeds ₹7,00,000, marginal relief applies, but is not available under the regular scheme.
- Under the new tax regime, the following exemptions can be claimed:
- Transport allowance for specially-abled individuals.
- Conveyance, daily, and travel allowances for employment-related expenditures.
- Employer contributions to NPS under Section 80CCD(2), additional employee costs under Section 80JJAA, and amounts deposited in the Agniveer corpus fund under Section 80CCH(2).
- A standard deduction of ₹50,000 is also applicable.
- Interest under Section 24(b) for let-out property is set-off against HP income only; losses cannot offset other income.
- Family pensioners may claim either ₹15,000 or one-third of their pension, whichever is lower.
Example Calculations
-
Example 1: An individual with a salary income of ₹8,00,000 and an investment of ₹1,50,000 in a PPF account.
Particulars Regular/Old Regime New Regime Salary ₹8,00,000 ₹8,00,000 Less: Standard Deduction ₹50,000 ₹50,000 Taxable Income ₹7,50,000 ₹7,50,000 Less: Deduction u/s 80C ₹1,50,000 – Net Taxable Income ₹6,00,000 ₹7,50,000 Relief 87A Nil Nil Income Tax (without HEC) ₹32,500 ₹30,000 -
Example 2: An individual with a salary of ₹10,00,000 and an investment of ₹1,50,000 in a PPF account.
Particulars Regular/Old Regime New Regime Salary ₹10,00,000 ₹10,00,000 Less: Standard Deduction ₹50,000 ₹50,000 Taxable Income ₹9,50,000 ₹9,50,000 Less: Deduction U/s 80C ₹1,50,000 – Net Taxable Income ₹8,00,000 ₹9,50,000 Relief 87A Nil Nil Income Tax (without HEC) ₹72,500 ₹52,500 -
Example 3: An individual with a salary of ₹10,00,000, an investment of ₹1,50,000 in a PPF account, and self-occupied house interest of ₹2,00,000.
Particulars Regular/Old Regime New Regime Salary ₹10,00,000 ₹10,00,000 Less: Standard Deduction ₹50,000 ₹50,000 Taxable Income ₹9,50,000 ₹9,50,000 Less: Interest u/s 24(b) ₹2,00,000 – Less: Deduction 80C ₹1,50,000 – Net Taxable Income ₹6,00,000 ₹9,50,000 Relief 87A Nil Nil Income Tax (without HEC) ₹32,500 ₹52,500
Conclusion
Understanding the differences between the old and new tax regimes is essential for taxpayers as they prepare their income tax returns. By knowing the applicable rates, deductions, and rebates, individuals can make choices that align with their financial situations and preferences, ultimately ensuring compliance and optimizing their tax liability.