Understanding Income Tax Rules for FY 2024-25: A Comprehensive Guide for Salaried Employees

Know the key differences and rules for new and old income tax regimes as a salaried employer
Income Tax - Income Tax Rules - Comprehensive Guide for Salaried Employees - Comprehensive Guide - TAXSCAN

Salaried employees have to furnish their income tax return and declare their income by July 31. As we stepped into the financial year 2024-25 on April 1, it is imperative to grasp the nuances of income tax regulations.

Despite the potential for changes in the Union Budget or throughout the year, alterations typically take effect at the commencement of the new financial year.

Notably, for FY 2024-25, there were no major modifications announced in the interim budget, thus maintaining continuity with the income tax rules from the previous year.

Here is what you need to know as a salaried individual:

1. Choosing Between Old and New Tax Regimes

Employees are required to choose between the old and new tax regimes for Tax Deducted at Source ( TDS ) on salary. The default option is the new tax regime, necessitating employees to promptly inform their employers if opting for the old tax regime to avoid tax deduction based on the new regime from their salary.

Read More: Income Tax Portal Update: Form 10IEA for Choosing Old Regime Now available for Filing

New Income Tax Regime: Tax Slabs vs Tax Slabs of Old Income Tax Regime

New RegimeOld Regime
Income SlabRateIncome SlabRate
0-3 LakhsNIL0-2.5 LakhsNIL
3-6 Lakhs5%2.5-5 Lakhs5%
6-9 Lakhs10%5-10 Lakhs20%
9-12 Lakhs15%Above 10 Lakhs30%
12-15 Lakhs20%  
Above 15 Lakhs30%  

2. Basic Exemption Limits

Divergence exists in the basic exemption limit between the old and new tax regimes. Under the new tax regime, all individuals enjoy a tax exemption for income up to Rs 3 lakh. Conversely, the old tax regime’s exemption limit varies by age: Rs 2.5 lakh for individuals below 60 years, Rs 3 lakh for seniors aged 60 to 80 years, and Rs 5 lakh for super senior citizens aged 80 years and above.

3. Tax Rebates

Both tax regimes provide tax rebates under Section 87A, which eliminate tax liabilities if the net taxable income remains below a specified threshold. The new tax regime offers a higher rebate of up to Rs 25,000, rendering incomes up to Rs 7 lakh tax-free, while the old regime’s rebate goes up to Rs 12,500, making incomes up to Rs 5 lakh tax-exempt.

4. Deductions and Exemptions: New vs. Old Regime

While both regimes offer deductions and exemptions, the old regime presents a broader array. Examples include standard deduction, Section 80C for investments and expenses up to Rs 1.5 lakh, health insurance premium deductions under Section 80D, and additional NPS investment deductions under Section 80CCD (1B), among others. Conversely, the new regime offers limited deductions, such as a standard deduction of Rs 50,000 and deductions under Section 80CCD (2) for NPS contributions.

5. Filing Income Tax Returns ( ITR )

For those opting for the old or new tax regime, filing ITR before the July 31 deadline is mandatory. Filing a belated ITR between August 1 and December 31 will result in tax calculations based solely on the new regime.

6. Surcharge Rates

High-income earners opting for the new tax regime benefit from a reduced surcharge rate, dropping from 37% to 25% for incomes exceeding Rs 5 crore. In contrast, selecting the old regime incurs a 37% surcharge rate.

Understanding these income tax rules empowers individuals to make informed decisions regarding their tax obligations for FY 2024-25, ensuring compliance and optimal financial planning.

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