Income tax rates play a crucial role in the determination of the tax liability of any assessee for a given period. These rates are specified by the Income tax department from time to time. Each year, Govt may propose certain changes in the income tax rates during the Budget session in the form of a Finance Bill.
After the approval of the Finance Bill by both houses, these changes will become part of the Finance Act and thus be effective from the next financial year.
In this article, let’s understand the Income Tax slab rates applicable for Individual taxpayers for FY 2024-25 i.e. AY 2025-26. Pls do note, that there are NO changes proposed in Budget 2024 and hence there is NO change in the slab rates.
Introduction
To understand the tax calculation effectively, one must familiarise with the basic tax terminology.
Income Tax – Tax calculated either as per the slab rates (i.e. on Normal Income) or as per the fixed rates (i.e. on Special Incomes)
Rebate – Tax relief for Resident Individuals when their total income is up to Rs. 5 Lakh / 7 Lakh depending on their choice of tax scheme
Surcharge – Additional tax charged as a percentage of basic income tax, when total income is beyond Rs. 50 Lakh
Health & Education Cess – Cess on Basic Income tax + Surcharge
Total Income – Gross Total Income less sec 10 exemptions less Chapter VI-A deductions
Total Tax liability – Basic Income Tax – Rebate (if applicable) + Surcharge (if applicable) + Health & Education cess
Tax calculation process
Though the tax calculation process is NOT part of the current topic, understanding this will guide you on how to apply these rates and arrive at the final tax liability.
Here is the process:
Step1: Choose your preferred Tax Scheme i.e. Old scheme or New Scheme
Step2: Bifurcate Total Income into Normal and Special Incomes and apply respective slab rates
Normal Income – Any income other than Special Income & chargeable as per slab rates
Special Income – These are chargeable at fixed rates, unlike Normal Income. Eg: STCG/LTCG on sale of equity shares, LTCG on sale of immovable property & Income from lotteries and gaming etc.
Step3: Check for Rebate and Surcharge applicability and adjust for the respective component
Step4: Add HEC and arrive at the final tax liability
By following the above-mentioned steps, you can easily determine your total tax liability for any assessment year.
Now let’s see the tax rates under both tax schemes.
Income Tax Rates for AY 2025-26
1. Rates under the Old Tax Scheme
(a) For Resident Individuals or Non-Resident (age below 60 years)
| Total Income* | Income Tax |
|---|---|
| Upto Rs. 2.5 Lakh | Nil |
| From Rs. 2.5 Lakh to Rs. 5 Lakh | 5% on the amount exceeding Rs. 2.5 Lakh |
| From Rs. 5 Lakh to Rs. 10 Lakh | Rs. 12,500 + 20% on the amount exceeding Rs. 5 Lakh |
| More than Rs. 10 Lakh | Rs. 1,12,500 + 30% on the amount exceeding Rs. 10 Lakh |
(b) For Resident Senior Citizens (age 60 – 80 years )
| Total Income* | Income Tax |
|---|---|
| Upto Rs. 3 Lakh | Nil |
| From Rs. 3 Lakh to Rs. 5 Lakh | 5% on the amount exceeding Rs. 3 Lakh |
| From Rs. 5 Lakh to Rs. 10 Lakh | Rs. 10,000 + 20% on the amount exceeding Rs. 5 Lakh |
| More than Rs. 10 Lakh | Rs. 1,10,000 + 30% on the amount exceeding Rs. 10 Lakh |
(c) For Resident Super Senior Citizens (age 80 years or more )
| Total Income* | Income Tax |
|---|---|
| Upto Rs. 5 Lakh | Nil |
| From Rs. 5 Lakh to Rs. 10 Lakh | 20% on the amount exceeding Rs. 5 Lakh |
| More than Rs. 10 Lakh | Rs. 1,00,000 + 30% on the amount exceeding Rs. 10 Lakh |
Note: Enhanced limits of 3 Lakh & 5 Lakh mentioned in categories b & c will not be applicable for Non-Resident Senior Citizens / Non-Resident Super Senior Citizens respectively. For such individuals, the basic exemption limit is ONLY Rs. 2,50,000 and rates specified in category (a) are applicable to them.
2. Rates under New Tax Scheme
The new tax scheme is a concessional tax scheme introduced in Budget 2020. Initially, this scheme was only for Individuals & HUF, but from FY 2023-24 onwards AOP, BOI & AJP (other than co-op society) are also eligible to opt into this scheme.
But whenever you opt for this scheme, you may need to forego certain exemptions and deductions which are otherwise available under the old scheme.
Read here: 7 must know changes in New Tax Scheme as per Budget 2023
Tax rates under the New Tax scheme for FY 2024-25 are as follows:
For all Individuals (irrespective of their age)
| Total Income* | Income Tax |
|---|---|
| Upto Rs. 3 Lakh | Nil |
| From Rs. 3 Lakh to Rs. 6 Lakh | 5% on the amount exceeding Rs. 3 Lakh |
| From Rs. 6 Lakh to Rs. 9 Lakh | Rs. 15,000 + 10% on the amount exceeding Rs. 6 Lakh |
| From Rs. 9 Lakh to Rs. 12 Lakh | Rs. 45,000 + 15% on the amount exceeding Rs. 9 Lakh |
| From Rs. 12 Lakh to Rs. 15 Lakh | Rs. 90,000 + 20% on the amount exceeding Rs. 12 Lakh |
| More than Rs. 15 Lakh | Rs. 1,50,000 + 30% on the amount exceeding Rs. 15 Lakh |
*Total Income = Gross Total Income less sec 10 exemptions less Chapter VI-A deductions
So far, we have only calculated basic income tax as per your preferred tax scheme. Now, we will see the remaining components.
Rebate
Rebate is a tax relief available for Resident Individuals up to the certain level of their taxable income.
Taxpayers with the old scheme can claim rebate up to Rs. 5 Lakh, whereas for taxpayers with new scheme can claim rebate up to Rs. 7 Lakh. In either case, either 100% of income tax or Rs. 12,500/25,000 (for old and new schemes respectively) whichever is less is allowed as a Rebate under sec 87A.
Read the full article on Rebate: Is Section 87A Rebate for everyone?
Until FY 22-23, the rebate limit under both the schemes is the same which is Rs. 5 Lakh. But from FY 23-24 onwards, the rebate limit under the new scheme is enhanced to Rs. 7 Lakh. So with the help of the new scheme, you need not pay any tax up to Rs. 7.5 Lakh taxable income.
So, for Resident Individuals if their total income (i.e. Gross Total Income less deductions from Sec 80C to 80U) is less than or equal to Rs. 5 Lakh / 7 Lakh then your tax liability for the relevant financial year is ZERO, provided they are not having any special incomes.
Following is summary of rebate under both schemes:
| Tax Scheme | When Rebate is available | Eligible Reate u/s 87A |
|---|---|---|
| Old Scheme | Income is up to Rs. 5 Lakh | Lower of 100% of Income Tax and Rs. 12,500 |
| New Scheme | Income is up to Rs. 7 Lakh | Lower of 100% of Income Tax and Rs. 25,000 |
Surcharge
It is an additional tax levied when the total income is beyond Rs. 50 Lakh. Surcharge rates under both schemes are the same till FY 22-23. But from FY 23-24 (as per Budget 2023) onwards maximum surcharge that can be levied under the new scheme is limited to 25%.
So whoever opts for the new tax regime from FY 23-24 onwards, if their income is beyond 2 crores then the maximum surcharge is capped at 25% only, instead of 37%.
Surcharge rates under both schemes are as follows:
| Total Income | Surcharge in Old scheme | Surcharge in New Scheme |
|---|---|---|
| From Rs. 50 lakh to Rs. 1 crore | 10% of Income Tax | 10% of Income Tax |
| From Rs. 1 crore to Rs. 2 crore | 15% of Income Tax | 15% of Income Tax |
| From Rs. 2 crore to Rs. 5 crore | 25% of Income Tax | 25% of Income Tax |
| More than Rs. 5 crore | 37% of Income Tax | 25% of Income Tax |
Note: For any assessment year, either a Rebate or Surcharge is only applicable. If a Surcharge is applicable, marginal relief can be claimed.
Health & Education Cess
It is a cess which is 4% of Basic Income Tax and Surcharge (If applicable).
Conclusion
After determining each component as mentioned above, you need to calculate your total tax liability as follows:
Total tax payable = Basic Income tax – Rebate (if applicable) + Surcharge (if applicable) + Health & Education Cess
Finally, any credit for TDS/TCS should be adjusted against total tax liability and any balance has to be remitted by using proper challans before proceeding with Income Tax Return (ITR) filing.
Hope you enjoyed reading this article, thanks for your time. Any queries, pls post them in the comments below.
