For the Financial Year (FY) 2024-25 (Assessment Year 2025-26), the Indian income tax structure for salaried individuals has undergone significant changes, particularly under the new tax regime. Here's a comprehensive overview:
Income Tax Slabs and Rates:
Under the new tax regime, the income tax slabs are as follows:
| Annual Income (₹) | Tax Rate (%) |
|---|---|
| Up to 3,00,000 | Nil |
| 3,00,001 to 7,00,000 | 5% |
| 7,00,001 to 10,00,000 | 10% |
| 10,00,001 to 12,00,000 | 15% |
| 12,00,001 to 15,00,000 | 20% |
| Above 15,00,000 | 30% |
Notably, individuals earning up to ₹12 lakh are exempt from paying income tax under this regime. A standard deduction of ₹75,000 for salaried individuals raises this exemption limit to ₹12.75 lakh. Additionally, reduced tax rates and marginal relief aid those earning slightly above ₹12 lakh, ensuring lower tax liabilities.
The old tax regime continues with its previous slabs and allows for various deductions and exemptions. Taxpayers can choose between the old and new regimes based on which is more beneficial for them.
Standard Deduction:
The standard deduction for salaried individuals has been increased from ₹50,000 to ₹75,000 under the new tax regime. This change is applicable for statements pertaining to FY 2024-25 Q4 onwards.
Tax Deducted at Source (TDS) on Salaries:
Employers are required to deduct TDS from employees' salaries based on the applicable income tax slab rates. The Central Board of Direct Taxes (CBDT) has released Circular No. 3/2025, detailing the procedures for TDS deduction from salaries under Section 192 of the Income Tax Act for FY 2024-25. This circular includes amendments in Form 16 and Form 24Q to incorporate changes in reporting other tax deductions and perquisites.
Key Changes in TDS Provisions:
Amendment in Forms:
- Form 24Q: Now includes a new column (388A) to report other TDS/TCS deductions.
- Form 16: Modified to reflect amendments in reporting other tax deductions and perquisites.
Standard Deduction Update:
- The increase in standard deduction to ₹75,000 is reflected under Annexure II (Salary details) and Annexure III of the forms. This change applies only under the new tax regime for statements from FY 2024-25 Q4 onwards.
- The increase in standard deduction to ₹75,000 is reflected under Annexure II (Salary details) and Annexure III of the forms. This change applies only under the new tax regime for statements from FY 2024-25 Q4 onwards.
TDS Rates for Other Payments:
While TDS on salaries is deducted as per the applicable income tax slab rates, other payments have specific TDS rates. For instance, the TDS rate for dividends under Section 194 is 10% if the dividend amount exceeds ₹5,000.
Choosing Between Old and New Tax Regimes:
Taxpayers have the option to choose between the old and new tax regimes each financial year. The decision should be based on a comparison of tax liabilities under both regimes, considering available deductions and exemptions. Employers may request employees to declare their preferred tax regime at the beginning of the financial year to ensure accurate TDS deduction.
For precise calculations and to determine the most beneficial tax regime, individuals are encouraged to use the Income Tax Department's official TDS Calculator.
Please note that tax laws are subject to amendments. It's advisable to consult with a tax professional or refer to official notifications from the Income Tax Department for the most current information.
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