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Taxation is a crucial aspect of a country's economic system, shaping financial policies and impacting individuals and businesses alike. In India, understanding tax slabs and the associated regimes is fundamental for effective financial planning. In this article, we delve into the concepts of tax slabs, comparing the old and new tax regimes for Assessment Year (AY) 2024-25. We'll explore income tax rates, deductions, exemptions, and strategies to optimise tax savings.

What are Tax Slabs?

Tax slabs refer to the categorization of income into different brackets, each with its own corresponding tax rate. In India, the income tax slabs are revised periodically to align with economic conditions and government policies.

Old Tax Regime vs. New Tax Regime:

The old tax regime followed a structure where taxpayers could avail of various deductions and exemptions to reduce their taxable income. On the other hand, the new tax regime has lower tax rates but eliminates most tax breaks and deductions.

Income Tax Slabs & Rates:

For AY 2024-25, let's examine the income tax rates under both regimes:

Old Tax Regime: 

New Tax Regime Under Section 115 BAC:

Example: Understanding Tax Slabs Through a Case Study

Let's consider the case of Mr. and Mrs. Sharma, a salaried couple residing in Mumbai. They are exploring their tax liability under both the old and new tax regimes for AY 2024-25.

Income Details:

• Mr. Sharma's Annual income from Salary (after allowable exemptions and deductions): ₹8,00,000
• Mrs. Sharma's Annual Salary (after allowable exemptions and deductions): ₹6,00,000

Old Tax Regime Calculation:

Under the old tax regime, let's calculate the Sharmas' tax liability:

• Mr. Sharma's Taxable Income: ₹8,00,000
• Tax on ₹2,50,000 (Nil): ₹0
• Tax on ₹2,50,001 - ₹5,00,000 (5%): ₹12,500
• Tax on ₹5,00,001 - ₹8,00,000 (20%): ₹60,000
• Total Tax Liability for Mr. Sharma: ₹72,500+Cess - ₹2900= ₹75,400)
  
• Mrs. Sharma's Taxable Income: ₹6,00,000
• Tax on ₹2,50,000 (Nil): ₹0
• Tax on ₹2,50,001 - ₹5,00,000 (5%): ₹12,500
• Tax on ₹5,00,001 - ₹6,00,000 (20%): ₹20,000
• Total Tax Liability for Mrs. Sharma: ₹32,500+ Cess ₹1300= ₹33,800

New Tax Regime Calculation:

Under the new tax regime, let's calculate the Sharmas' tax liability:

• Mr. Sharma's Taxable Income: ₹8,00,000
• Tax on ₹3,00,000 (Nil): ₹0
• Tax on ₹3,00,001 - ₹6,00,000 (5%): ₹15,000
• Tax on ₹6,00,001 - ₹8,00,000 (10%): ₹20,000
• Total Tax Liability for Mr. Sharma: ₹35,000+Cess ₹1400=₹36,400
  
• Mrs. Sharma's Taxable Income: ₹6,00,000
• Tax on ₹3,00,000 (Nil): ₹0
• Tax on ₹3,00,001 - ₹6,00,000 (5%): ₹12,500
• Total Tax Liability for Mrs. Sharma: ₹12,500+ cess ₹500 =13,000
• Tax Rebate u/s 87A = 13,000/-, Hence, no tax is payable

Comparison:

Conclusion:

Understanding tax slabs under the old and new tax regimes is essential for effective tax management. By leveraging the right deductions, exemptions, and investment avenues, individuals can optimise their tax savings while staying compliant with applicable laws. Click here to book your FREE tax assessment call 

Disclaimer:

The article is only for educational purposes and is not to be construed as tax advice. The relevant provisions of the Income-tax Act may be referred to, for complete understanding.