Budget 2025: New Income Tax Slabs Explained, Key Differences Between Old and New Regimes

New Delhi: Finance Minister Nirmala Sitharaman's eighth Budget has introduced significant changes in the income tax structure, offering relief to middle-class salaried individuals. However, the revised tax slabs under the new regime have sparked questions among taxpayers regarding the extent of the relief.

New Income Tax Slabs Under New Regime

The 2025 Budget outlines revised tax slabs under the New Tax Regime. Here is a breakdown of the new rates:

• Up to ₹4 lakh: No tax
• ₹4 lakh - ₹8 lakh: 5% tax
• ₹8 lakh - ₹12 lakh: 10% tax
• ₹12 lakh - ₹16 lakh: 15% tax
• ₹16 lakh - ₹20 lakh: 20% tax
• ₹20 lakh - ₹24 lakh: 25% tax
• Above ₹24 lakh: 30% tax

How Have the Slabs Changed?

The revised slabs present several changes:

• The no-tax limit has increased from ₹3 lakh to ₹4 lakh.
• The 5% tax bracket now covers ₹4 lakh to ₹8 lakh, up from ₹3 lakh to ₹7 lakh.
• The 10% slab now applies to ₹8 lakh to ₹12 lakh, up from ₹7 lakh to ₹10 lakh.
• The previous ₹12 lakh to ₹15 lakh slab at 15% is now ₹12 lakh to ₹16 lakh.
• The earlier flat 30% tax on income above ₹15 lakh is now segmented into multiple slabs, with the highest 30% rate applicable only to income above ₹24 lakh.

How Is Income Up To ₹12 Lakh Tax-Free?

The government has introduced rebates to make income up to ₹12 lakh tax-free. For salaried individuals, the tax-free threshold rises to ₹12.75 lakh, including a standard deduction of ₹75,000. The rebates start at ₹10,000 for an income of ₹8 lakh and go up to ₹80,000 for an income of ₹12 lakh.

Tax Calculation Examples

For an annual income of ₹16 lakh:

• No tax on the first ₹4 lakh.
• 5% on ₹4 lakh to ₹8 lakh = ₹20,000
• 10% on ₹8 lakh to ₹12 lakh = ₹40,000
• 15% on ₹12 lakh to ₹16 lakh = ₹60,000
  Total Tax: ₹1,20,000
  This is a saving of ₹50,000 compared to the old regime.

For an annual income of ₹50 lakh:

• The total tax payable is ₹10,80,000 under the new regime, resulting in a saving of ₹1,10,000 compared to the previous slabs.

What About the Old Tax Regime?

The Budget focuses on the New Tax Regime to simplify personal taxation by removing exemption complexities. The old regime remains unchanged, as neither the Budget document nor the Finance Minister mentioned any revisions to the existing slabs under the old system.

Should You Switch to the New Tax Regime?

Deciding between the old and new regimes depends on your financial situation and available exemptions under the old regime. For example, with an income of ₹16 lakh and exemptions totaling ₹4 lakh, the taxable income becomes ₹12 lakh. Under the old regime, the tax payable would be ₹1,72,500—₹52,000 more than the new regime's rate.