Tax slabs under new tax regime revised; here’s how much you need to pay on income of ₹7 lakh, ₹10 lakh, ₹12 lakh and ₹20 lakh

Finance Minister Nirmala Sitharaman announced major changes in the income-tax slabs under the new tax regime in the full Union Budget for FY25.

In her Budget speech in Parliament, on July 23 the Finance Minister increased the standard deduction under the new tax regime to ₹75,000 from ₹50,000 to make it more lucrative for taxpayers. The existing tax slabs under the new regime were also revised. The move will help individuals to save more on their total income tax liability.

“I have two announcements to make for those opting for the new tax regime. First, the standard deduction for salaried employees is proposed to be increased from ₹50,000 to ₹75,000. Similarly, deduction on family pension for pensioners is proposed to be enhanced from ₹ 15,000 to ₹ 25,000. This will provide relief to about four crore salaried individuals and pensioners,” the Finance Minister said.

However, the finance minister left the slabs and applicable tax rates under the old tax regime unchanged.

As per the proposed changes, annual income of up to ₹3 lakh will continue to remain tax-free whereas the slab for the 5% tax bracket has been enhanced to ₹3 lakh to ₹7 lakh from the previous ₹3 lakh to ₹6 lakh earlier.

The 10% tax rate would now apply to the taxable income of ₹7 lakh to ₹10 lakh in a financial year instead of ₹6 lakh to ₹9 lakh earlier.

The proposed changes will help salaried individuals to save up to ₹17,500 per annum, the Finance Minister said.

The tax bracket of ₹12 lakh to ₹15 lakh, and ₹15 lakh and above have been left unchanged.

New tax regime: Existing tax slabs

New tax regime: Revised tax slabs

In Budget 2024, under the new tax regime, the tax rate structure has been proposed as follows:

Annual income up to ₹7.75 lakh

In Budget 2023, the government had increased the income rebate under the new tax regime from ₹5 lakh to ₹7 lakh. The standard deduction of ₹50,000 was extended to the new tax regime for salaried taxpayers and pensioners. So, income up to ₹7.5 lakh was tax-free.

Now, with the hike in the standard deduction to ₹75,000 in Budget 2024, there will be no income tax on annual incomes up to ₹7.75 lakh.

• Total Income: ₹7.75 lakh
• Standard deduction: ₹75,000
• Total taxable income: ₹7,00,000
• Tax on income up to ₹3,00,000- Nil
• Tax on Income ₹3,00,001 - ₹7,00,000: 5% or ₹20,000
• Rebate under section 87A- ₹25,000

Annual income up to ₹10 lakh

If you are an individual taxpayer with an annual income of up to ₹10 lakh, you will have to pay ₹42,500 as tax under the revised new tax regime against the previous total outgo of ₹52,500.

• Total Income: ₹10,00,000
• Standard Deduction: ₹75,000
• Taxable Income: ₹9,25,000
• Tax on ₹3,00,000- Nil
• Tax on Income ₹3,00,001 - ₹7,00,000: 5% or ₹20,000
• Tax on ₹7,00,001 - ₹9,25,000: 10% or ₹22,500

Annual income up to ₹12 lakh

If you are an individual taxpayer with an annual income of up to ₹12 lakh, you will have to pay a total income tax of ₹68,750 under the revised new tax regime compared to ₹82,500 previously.

• Total Income: ₹12,00,000
• Standard Deduction: ₹75,000
• Taxable Income: ₹11,25,000
• Tax on ₹3,00,000- Nil
• Tax on ₹3,00,001 - ₹7,00,000: 5% or ₹20,000
• Tax on ₹7,00,001 - ₹10,00,000: 10% or ₹30,000
• Tax on ₹10,00,001 - ₹11,25,000: 15% or ₹18,750

Annual income up to ₹20 lakh

Individuals with an annual income of ₹20,00,000 will have to pay income tax of ₹2,67,500 as against ₹2,85,000 previously.

• Total Income: ₹20,00,000
• Standard Deduction: ₹75,000
• Taxable Income: ₹19,25,000
• Tax on ₹3,00,000- Nil
• Tax on ₹3,00,001 - 7,00,000: 5% or ₹20,000
• Tax on ₹7,00,001 - 10,00,000: 10% or ₹30,000
• Tax on ₹10,00,001 - ₹12,00,000: 15% or ₹30,000
• Tax on ₹12,00,001 - ₹15,00,000: 20% or ₹60,000
• Tax on ₹15,00,001 - ₹19,25,000: 30% or ₹1,27,500

The revisions under the new tax regime are aimed at empowering the middle class. However, taxpayers should know that they can avail the benefits of higher standard deductions and tax slabs only under the new tax regime. As the government has left the old tax regime unchanged, the taxpayers will have to opt for the new tax regime while filing income tax returns (ITR) for FY 2024-25 to get these benefits. The new tax regime has been made default regime for FY 2023-24 (AY 2024-25).