Overview of Income Tax in India for FY 2024–25

India’s income tax system is designed to ensure that citizens contribute fairly to national development. Each financial year, tax rules and policies are updated to reflect economic needs and support taxpayers.

For FY 2024–25, taxpayers can continue choosing between two regimes – the old tax regime, which allows various deductions and exemptions, and the new tax regime, which offers lower tax rates but without most exemptions.

A major update this year is the increased Section 87A rebate under the new regime. Eligible individuals can now claim a rebate of up to ₹60,000, making income up to ₹7.5 lakhs completely tax-free. This change aims to make the new regime more attractive, especially for those without major investments or deductions.

The old regime remains a better choice for people claiming benefits like Section 80C deductions or house rent allowance (HRA). Additionally, TDS (Tax Deducted at Source) limits and rates have been adjusted in certain cases, so it’s important to stay updated.

In summary, income tax in India for 2025 focuses on simplifying the process, promoting digital filing, and improving compliance. Taxpayers should assess their income, deductions, and goals carefully before choosing the regime that best reduces their tax burden.

What are Income Tax Slabs and Why They Matter

Income tax slabs define how much tax you pay based on your annual income. India follows a progressive tax system, where higher income levels fall into higher tax brackets. These slabs ensure fairness and are reviewed regularly to keep up with inflation and the economy.

Understanding your tax slab helps you estimate your tax liability and plan better. Whether you opt for the old or new tax regime, knowing which bracket you fall into is key to making informed financial decisions.

There are two main regimes you can choose from:

Old Tax Regime:

• Offers a wide range of deductions and exemptions.
• Common slabs include:
  
  • ₹0 – ₹2.5 lakh: No tax
  • ₹2.5 lakh – ₹5 lakh: 5%
  • ₹5 lakh – ₹10 lakh: 20%
  • Above ₹10 lakh: 30%

New Tax Regime:

• Lower tax rates with no major exemptions.
• Includes more tax brackets for smoother progression.
• Designed for simplified compliance.

Why Do Income Tax Slabs Matter?

• Help ensure fair taxation—higher earners pay more.
• Allow flexibility in choosing between the old and new regime.
• Influence investment and tax-saving decisions.

Crucial for accurate tax planning and filing.
 

New Income Tax Slabs for FY 2024–25

The new tax regime slabs 2025 aim to simplify taxation by offering reduced rates across more income brackets—but with no major exemptions. This regime is now the default option for taxpayers, although individuals can still opt for the old regime if they wish.

Income Tax Rates FY 2024–25 under the New Regime:

Rebate under Section 87A is available for incomes up to ₹7 lakh, making tax liability zero under the new regime slabs.

Example:

If your taxable income is ₹9,00,000:

• No tax on the first ₹3,00,000
• 5% on ₹3,00,001 – ₹6,00,000 = ₹15,000
• 10% on ₹6,00,001 – ₹9,00,000 = ₹30,000
• Total Tax = ₹45,000 (plus cess)

Understanding these income tax rates FY 2024–25 is crucial to estimate your liability correctly and decide if the new regime slabs benefit you more than the old regime.

Old Tax Regime Slabs for FY 2024–25

The old tax regime remains an option for taxpayers who claim various deductions and exemptions. While the tax rates old regime are slightly higher, it benefits those who invest in tax-saving instruments like LIC, PPF, ELSS, home loan interest, and more.

Income Tax Old Regime Slabs (for Individuals below 60 years):

Points to Note:

• Individuals can claim deductions under Section 80C (up to ₹1.5 lakh), 80D, HRA, LTA, and more.
• A rebate under Section 87A is available if your taxable income does not exceed ₹5 lakh, making the tax liability zero.

What is Section 87A Rebate and Who Can Claim It?

Section 87A of the Income Tax Act provides a rebate on the total tax payable for individuals with lower income. It is applicable to both old and new tax regimes, but the eligibility limits differ.

Key Highlights of Section 87A for FY 2024–25:

• Eligibility:
  Only resident individuals (not HUFs or companies) are eligible.
  
  • Under the old tax regime, the rebate is available if taxable income is up to ₹5,00,000.
  • Under the new tax regime, the limit is ₹7,00,000.
• Rebate Amount:
  
  • Maximum rebate under Section 87A is ₹12,500.

Example:

If your total taxable income under the new regime is ₹6.8 lakh, your tax may be ₹23,400. After claiming the ₹12,500 income tax rebate under Section 87A, your tax reduces to ₹10,900 (excluding cess).

Section 87A Rebate: Differences Between Old and New Tax Regimes

Section 87A offers a tax rebate to individuals with income below a certain threshold. However, the rebate limit and eligibility differ under the old and new tax regimes.

87A New vs Old Regime – Key Differences

Tax Rebate Comparison Example

• A person earning ₹6.5 lakh:
  
  
  • Under old regime, after deductions, if taxable income is ₹5 lakh → eligible for ₹12,500 rebate.
  • Under new regime, no deductions needed → directly eligible for ₹25,000 rebate if income is up to ₹7 lakh.
     

How the ₹60,000 Rebate under New Regime Impacts Tax Liability

Under the new tax regime for FY 2024–25, taxpayers can benefit from a significant rebate of up to ₹60,000, helping reduce their overall tax burden.

What is the ₹60,000 Tax Rebate?

The government introduced a standard deduction of ₹50,000 and an increased Section 87A rebate of ₹25,000. When combined, these two benefits effectively create a total tax relief of ₹60,000 under the new tax regime rebate structure.

Example of Impact:

Let’s assume your total income is ₹7 lakh:

• Standard deduction: ₹50,000
• Taxable income: ₹6.5 lakh
• Total tax on ₹6.5 lakh: ₹25,000
• Section 87A rebate: ₹25,000
• Final tax payable: ₹0

This means if your taxable income (after standard deduction) is up to ₹7 lakh, you pay no tax.

Why It Matters

This ₹60,000 tax rebate makes the new tax regime more attractive for individuals who do not have major deductions like 80C, HRA, etc. It simplifies tax filing and ensures that low- to mid-income earners retain more of their salary.

Common Mistakes to Avoid While Claiming the 87A Rebate

Claiming the Section 87A rebate can significantly reduce your tax liability—but only if done correctly. Many taxpayers miss out on this benefit due to small but costly mistakes.

Common 87A Claim Issues:

1. Exceeding Income Limit
   The rebate is only available if your total taxable income after deductions is within the eligible limit (₹7 lakh for the new regime in FY 2024–25). Crossing this even by ₹1 disqualifies you.
2. Wrong Regime Selection
   Section 87A applies under both regimes, but the rebate amount differs. Choosing the wrong regime without tax planning may lead to missed savings.
3. Ignoring Standard Deduction
   Under the new regime, a ₹50,000 standard deduction is applicable. If you forget to apply it, your taxable income may appear higher, affecting your 87A rebate eligibility.
4. Filing Incorrect Form
   Filing ITR without proper calculation of net taxable income or selecting incorrect ITR forms can lead to rejection of the rebate claim.
    

Income Tax Rebate Tips:

• Always calculate net taxable income post-deductions.
• Use the right ITR form and verify all figures.
• Consult a tax expert if unsure about regime selection.

Old vs New Tax Regime: Which is Better in FY 2024–25?

Choosing between the old and new tax regime for FY 2024–25 depends on your income structure, deductions, and financial goals. Here's a simple breakdown to help you decide:

Old Tax Regime:

• Pros:
  Allows deductions like ₹1.5 lakh under Section 80C (LIC, PF, ELSS, etc.)
  Offers tax benefits for HRA, home loan interest, medical insurance, and more.
• Cons:
  Tax slabs are higher compared to the new regime.
• More paperwork and documentation needed for claiming deductions.
   

New Tax Regime (FY 2024–25):

• Pros:
  Lower tax rates with revised slabs.
  Simple structure—no need to track deductions.
• ₹50,000 standard deduction and ₹60,000 Section 87A rebate for incomes up to ₹7 lakh.
• Cons:
  Most exemptions and deductions are not allowed.
   

Which One Should You Choose?

• If you have multiple deductions and investments, the old regime might save you more.
• If you prefer a simplified process with no deductions, the new regime is better.
   

Factors to Consider Before Choosing Between Tax Regimes

Selecting the right tax regime is a key part of income tax planning for FY 2025. Before making a decision, consider the following factors:

1. Total Income and Taxable Components

• Check your gross income, salary components (like HRA, LTA), and other income sources.
• Some allowances are tax-free under the old regime but fully taxable in the new regime.

2. Available Deductions and Exemptions

• Do you invest in PPF, ELSS, LIC, or pay home loan interest?
• If yes, the old regime with its multiple deductions (like 80C, 80D, Section 24) may be more beneficial.

3. Ease of Filing

• If you prefer a simple and hassle-free process without tracking deductions, the new regime is more straightforward.

4. Rebate Under Section 87A

• In the new regime, income up to ₹7 lakh qualifies for a ₹60,000 rebate under Section 87A.
• This makes it tax-free for many middle-income individuals.

5. Long-Term Tax Strategy

• Consider how your income and deductions may change in the future. Choose a regime that aligns with both your current and future financial planning goals.
   

Can You Switch Between Old and New Regimes Every Year?

Yes, you can switch between the old and new tax regimes every financial year when filing your income tax return. The Indian tax system offers flexibility, allowing taxpayers to choose the regime that best suits their financial situation each year.

Key Points to Remember:

• Salaried individuals and pensioners can opt for either regime annually.
• If you have income from business or profession, switching is limited—you must stick to the regime you choose for the entire financial year.
• You cannot switch regimes mid-year; the choice applies for the whole FY.
• While switching, consider your income, deductions, exemptions, and available rebates to minimize tax liability.
• It’s advisable to evaluate your tax planning each year since changes in income or investments can affect which regime is better.

In short, switching regimes yearly gives you the advantage of flexibility and lets you optimize your taxes based on your current financial circumstances.

What is TDS and How Does It Work?

TDS, or Tax Deducted at Source, is a mechanism introduced by the Indian government to collect tax at the very source of income. Simply put, it means that tax is deducted before you receive your income, ensuring timely tax collection and reducing tax evasion.

Here’s how it works:

• When you receive certain types of income like salary, interest, rent, or professional fees, the payer (such as your employer, bank, or client) deducts a specified percentage of tax.
• This deducted tax amount is then directly deposited with the government on your behalf.
• The deducted tax is reflected in your Form 26AS, which you can check online to ensure proper credit.
• At the end of the financial year, the total TDS deducted is adjusted against your total tax liability when you file your Income Tax Return (ITR).
• If more tax is deducted than you owe, you can claim a refund; if less, you’ll pay the balance tax.

TDS ensures that the government receives steady tax revenue and helps taxpayers avoid lump-sum tax payments at year-end.

TDS Rates and Thresholds for FY 2024–25

For FY 2024–25, the government has updated various TDS limits and rates to simplify tax compliance and ease the burden on taxpayers. Understanding these revised TDS rates is crucial to avoid surprises when tax is deducted from your income.

Key TDS thresholds and rates for FY 2024–25 include:

• Interest on securities (Section 193): No TDS if interest is up to ₹10,000 annually.
• Interest on deposits (Section 194A): Threshold increased to ₹50,000 for most taxpayers and ₹1,00,000 for senior citizens, meaning TDS applies only if interest exceeds these limits.
• Dividend income (Section 194): TDS applies if dividend exceeds ₹10,000 per year.
• Winnings from lotteries and gambling (Sections 194B, 194BB): TDS at 30% if winnings exceed ₹10,000 per transaction.
• Rent payments (Section 194-I): TDS deducted if rent exceeds ₹50,000 per month.
• Professional fees (Section 194J): TDS applies if fees exceed ₹50,000 annually.

These threshold increases help taxpayers, especially small earners, by reducing unnecessary tax deductions.

TDS on Salary vs TDS on Interest: What’s the Difference?

Understanding the difference between TDS on salary and TDS on interest is essential for managing your tax effectively.

TDS on Salary:
This is deducted by your employer based on your estimated annual income and tax liability. The employer calculates your total income, applies deductions, exemptions, and tax slabs, then deducts TDS every month from your salary. It ensures your tax is paid regularly throughout the year.

TDS on Interest (e.g., Fixed Deposit):
Banks or financial institutions deduct TDS on the interest you earn from fixed deposits or other savings when it exceeds a certain threshold (usually ₹50,000 for senior citizens and ₹40,000 for others). This TDS is a flat rate (usually 10%) and does not consider your total income or exemptions, so you may need to adjust this during tax filing.

Key Differences:

• Calculation Basis: Salary TDS is based on estimated annual income and tax slabs; Interest TDS is a flat percentage on interest earned.
• Who Deducts: Employers deduct TDS on salary; banks deduct TDS on interest.
• Adjustment at Filing: Salary TDS is usually accurate; Interest TDS may require adjustment when filing returns.

Knowing these distinctions helps you plan your taxes better and avoid surprises during filing.

How to Calculate Your Tax Using Income Slabs and Deductions

Calculating your income tax for FY 2024–25 involves applying the right tax slabs to your taxable income and factoring in deductions to lower your overall tax liability.

Step 1: Determine Gross Income
Add up all your income sources—salary, business income, interest, etc.

Step 2: Subtract Deductions
Claim deductions under various sections (like 80C, 80D) and exemptions available under your chosen tax regime. This gives you your taxable income.

Step 3: Apply Income Tax Slabs
Use the applicable income tax slabs (old or new regime) to calculate the tax on your taxable income. For example, under the new regime, income up to ₹4 lakh is tax-free, then 5% on the next slab, and so on.

Step 4: Calculate Tax Liability
Add up the tax amounts for each slab. Then subtract any rebates like Section 87A if eligible.

Step 5: Add Cess
Finally, add health and education cess of 4% on the total tax calculated.

Quick Formula:
 Tax Liability = (Tax on slabs) – (Deductions + Rebates) + (Cess)

By following these steps, you can estimate your exact tax payable for FY 2024–25 and plan your finances better.

Example: Calculating Income Tax for FY 2024–25

Assumptions:

• Gross Income: ₹10,00,000
• Deductions under Section 80C: ₹1,50,000
• Tax Regime: New Tax Regime

Step 1: Calculate Taxable Income
Gross Income - Deductions = ₹10,00,000 - ₹1,50,000 = ₹8,50,000

Step 2: Apply New Tax Slabs for FY 2024–25

Total Tax = ₹10,000 + ₹25,000 = ₹35,000

Step 3: Apply Rebate (Section 87A)
Since taxable income is above ₹5,00,000, no rebate applies.

Step 4: Add Cess (4%)
Cess = 4% of ₹35,000 = ₹1,400

Step 5: Final Tax Liability
₹35,000 + ₹1,400 = ₹36,400

So, the total tax payable for the year would be ₹36,400.

How Standard Deduction Impacts Your Tax Liability in FY 2024–25

The standard deduction 2025 is a fixed amount that salaried employees and pensioners can deduct from their gross salary income, reducing their overall taxable income. For FY 2024–25, the government has set the standard deduction at ₹75,000.

What is Standard Deduction?

• It is a flat deduction available to salaried individuals and pensioners.
• Helps reduce the taxable income without the need for submitting bills or proofs.
• Simplifies tax filing and offers immediate tax relief.
   

How Does It Affect Your Tax Liability?

Suppose your gross salary is ₹10,00,000. Applying the standard deduction of ₹75,000 brings your taxable salary down to ₹9,25,000. This means you will pay income tax only on ₹9,25,000, not the full ₹10,00,000.

By lowering your taxable income, the standard deduction directly reduces your tax liability, helping you save money during tax filing. It works alongside other deductions under sections like 80C, 80D, etc., to further optimize your tax planning.

In summary, the ₹75,000 salary deduction for FY 2024–25 provides significant relief, especially for middle-income earners, by reducing the income amount subject to tax and lowering the overall tax payable.

Top Deductions You Can Claim Under Old Tax Regime

The old tax regime offers several popular deductions that help taxpayers reduce their taxable income and save on taxes. Here are some of the key 80C deductions and other tax-saving options available under the old regime benefits:

Key Deductions Under Old Regime:

• Section 80C Deductions:
  You can claim up to ₹1.5 lakh annually by investing in instruments like Public Provident Fund (PPF), Employee Provident Fund (EPF), National Savings Certificate (NSC), life insurance premiums, and Equity Linked Savings Schemes (ELSS).
• Section 80D – Health Insurance Premiums:
  Deduction on premiums paid for health insurance for self, family, and parents, helping reduce taxable income further.
• Section 24(b) – Home Loan Interest:
  Interest paid on home loans is deductible up to ₹2 lakh per year, providing relief for homeowners.
• Section 80E – Education Loan Interest:
  Interest on education loans can be claimed as a deduction for up to 8 years.
• Other Benefits:
  Deductions under 80TTA (interest on savings accounts), 80G (donations), and 80GG (rent paid) can also be claimed.

Why These Matter:

By utilizing these tax saving investments and deductions, taxpayers following the old regime can significantly lower their tax liability. This makes the old regime attractive for those who invest or spend in these specified ways.

Benefits of Filing ITR Even If You Have Zero Tax Liability

Filing your Income Tax Return (ITR), even when you have zero tax liability, offers several important benefits beyond just paying taxes. Here’s why filing your zero tax ITR for FY 2025 can be valuable:

Key Benefits of Filing ITR with Zero Tax Liability:

• Proof of Income:
  An ITR serves as official proof of your income and financial status, which is useful when applying for loans, credit cards, or visas.
• Easier Loan Approvals:
  Banks and financial institutions often require filed ITRs to assess your repayment capacity, even if you have no tax liability.
• Carry Forward Losses:
  Filing ITR allows you to carry forward business or capital losses to future years, helping reduce tax liability later.
• Claim Refunds and Benefits:
  If TDS (Tax Deducted at Source) was deducted mistakenly, filing ITR helps you claim refunds.
• Avoid Legal Issues:
  Filing on time keeps you compliant with tax laws and avoids penalties or scrutiny from the tax department.
• Facilitates Financial Planning:
  Your ITR records help in better financial and tax planning for upcoming years.

Even if your income falls below the taxable limit, filing your income tax return 2025 is a smart financial habit.

Tips to Maximize Tax Savings in FY 2024–25

Maximizing your tax savings in FY 2024–25 requires smart planning and awareness of available deductions and exemptions. Here are some effective tax saving tips to help you reduce your tax liability and boost your financial health:

Top Tips to Save Tax in 2025:

• Utilize Section 80C Fully:
  Invest up to ₹1.5 lakh in instruments like PPF, ELSS, NSC, or life insurance premiums to claim deductions.
• Claim Health Insurance Benefits (Section 80D):
  Deduct premiums paid for health insurance for yourself and family, including parents, to save tax.
• Make Use of Home Loan Benefits:
  Claim deductions on principal repayment under 80C and interest payments under Section 24.
• Opt for the New Tax Regime Only If Beneficial:
  Evaluate if the lower tax slabs with fewer deductions help you save more compared to the old regime.
• Use Standard Deduction:
  Salaried individuals can claim a standard deduction of ₹75,000 to reduce taxable income.
• Plan for Section 80E and 80TTA:
  Get deductions on education loan interest and interest from savings accounts.
• Invest in National Pension Scheme (NPS):
  Additional deductions are available under Section 80CCD for NPS contributions.

Effective income tax planning helps ensure you legally minimize taxes while growing your wealth. Always review your investments and tax options before the financial year ends.

FAQs

1. What are the major income tax changes in India for FY 2024–25?

The key changes include increased Section 87A rebate under the new regime, new tax slabs with lower rates, and standard deduction enhancements, aiming to simplify filing and reduce tax burden for many taxpayers.

2. What is the difference between the old and new income tax regimes in FY 2024–25?

The old regime allows various deductions like Section 80C, HRA, while the new regime offers lower tax rates but removes most exemptions. Taxpayers can choose based on their income and deductions.

3. What are the income tax slabs under the new tax regime for FY 2024–25?

The new regime has six tax slabs starting from 0% up to ₹3,00,000 income, increasing progressively up to 30% for income above ₹15,00,000, with a significant rebate under Section 87A for incomes up to ₹7 lakh.

4. How does the Section 87A rebate work in FY 2024–25?

Section 87A provides a rebate up to ₹60,000 under the new regime for incomes up to ₹7 lakh and ₹12,500 under the old regime for incomes up to ₹5 lakh, effectively reducing tax liability.

5. Who is eligible for the increased Section 87A rebate in FY 2024–25?

Resident individuals with taxable income up to ₹7 lakh under the new regime or ₹5 lakh under the old regime can claim the rebate, provided they meet the filing and income criteria.

6. What deductions are allowed under the old tax regime for FY 2024–25?

Deductions include Section 80C (up to ₹1.5 lakh), 80D (medical insurance), HRA, LTA, and others. These help reduce taxable income and are beneficial for taxpayers with eligible investments.

7. Can I switch between the old and new tax regimes every year?

Yes, taxpayers can choose their preferred regime every financial year during filing. Proper evaluation of income and deductions is important before switching.

8. How does the ₹60,000 rebate impact my tax liability under the new regime?

The combined ₹60,000 rebate (standard deduction plus Section 87A) can make incomes up to ₹7 lakh effectively tax-free under the new regime, significantly reducing tax payable.

9. What are common mistakes to avoid when claiming the Section 87A rebate?

Common errors include exceeding income limits, choosing the wrong tax regime, ignoring the standard deduction, and filing incorrect ITR forms. Accurate calculation and correct filing are essential.

10. How do I decide which tax regime is better for me in FY 2024–25?

Evaluate your total income, deductions, ease of filing, and long-term financial goals. Use online calculators and consider professional advice to pick the regime that minimizes your tax.