Indian income tax is a direct tax with a progressive slab system, with tax rates increasing with an increase in income. The government has given taxpayers options between the old and new tax regimes. The old regime offers exemptions and deductions, whereas the new regime provides lower tax rates but no exemptions or deductions. Both regimes will have different impacts on the total tax deducted. Continue reading to learn more.
Tax Slabs Under the New and Old Regime (FY 2024-25)
Below are the tax slabs for your ITR purposes. To simplify the ITR calculation process, you can also use an income tax calculator.
| Tax Slabs | Old Regime | Tax Slabs | New Regime |
| Up to INR 2.5 lakh | Nil | Up to INR 3 lakh | Nil |
| INR 2.5 lakh – 5 lakh | 5% | INR 3 lakh – 7 lakh | 5% |
| INR 5 lakh – 10 lakh | 20% | INR 7 lakh – 10 lakh | 10% |
| Above INR 10 lakh | 30% | INR 10 lakh – 12 lakh | 15% |
| INR 12 lakh – 15 lakh | 20% | ||
| Above 15 lakh | 30% |
Key Differences Between Old and New Tax Regime
- The new tax regime provides taxpayers with lower tax rates in different tax brackets.
- The old tax regime has many deductions and exemptions under Sections 80C, 80D, and 24(B), which are not present in the new tax regime.
How to Calculate Income Tax with Tax Slabs?
Listed below are the steps by which you can calculate your income tax using an online income tax calculator:
- Open the calculator
- Select your age
- Enter your annual income
- Enter the different investment details under Sections 80C, 80CCC, and 80CCD
- Input the details of your medical insurance premium, in case availed, under Section 80D
- Enter your NSP Self contributions under Section 80CCD (1B), which is up to INR 50,000
- Input your employer’s contribution for NPS under Section 80CCD (2)
Once you have filed the above information, you can see an overview of your investments, income, taxable income, and the amount of tax due.
What is Budget 2025 Update, and How Will It Affect Your Income Tax Calculations?
As per the 2025 budget, the government has raised the rebate limit in Section 87A from INR 7 lakh to INR 12 lakh. This offers significant relief to the Indian middle class, as now, salaried people can claim a standard deduction of INR 75,000, making any income up to INR 12.75 lakh tax-free.
The new tax slabs under the new regime will be:
| Tax Slabs | New Regime |
| Up to INR 4 lakh | Nil |
| INR 4 lakh – 8 lakh | 5% |
| INR 8 lakh – 12 lakh | 10% |
| INR 12 lakh – 16 lakh | 15% |
| INR 16 lakh – 20 lakh | 20% |
| INR 20 lakh – 24 lakh | 25% |
| Above INR 24 lakh | 30% |
These changes came into effect on 1 April 2025 and will be considered for the financial year 2025-2026. Besides, the extended period for filing updated returns is 4 years instead of 2. Even though the period is extended, you must remember to fill out the ITR and submit it on time.
Filing ITR will help you claim a refund if your employer deducts extra tax.
Hence, it is also essential for you to understand what is ITR and why it is vital for you. So, what is ITR? ITR is an official statement you provide to tax authorities as evidence of your earnings and taxes paid for the relevant fiscal year.
How to Choose Between Old and New Tax Regime for Income Tax Calculations?
It can be a tough decision between the old and new tax regimes if your income is more than INR 12 lakh (income up to INR 12 lakh is tax-free as per budget 2025). When deciding between the two, consider the exemptions and deductions in the old regime. After deducting all eligible deductions and exemptions, you will determine your net taxable income.
Calculating the tax responsibility based on this net taxable income makes it possible to compare the tax liability under the new tax system with the tax liability under the previous one. The right approach is to choose the regime that offers you a lower tax liability. Besides these exemptions and deductions, you must also consider any loss from capital gains, house property, or profession and business.
This will also impact your overall income tax calculations and be necessary for filing your ITR.
Conclusion
After introducing new tax slabs in the 2025 budget, there is a relief for people with an annual income of up to INR 12 lakh to pay zero tax. This will also help you choose between the old and new tax regimes after calculating your tax liabilities and deciding which will suit you best. As a taxpayer, you must look for all possibilities to save more tax to make the right choice that will impact your finances.
