New tax regime under section 115BAC of the Income Tax Act was introduced in the 2020 budget by Finance Minister Nirmala Sitharaman.
Tax Slabs in the New Regime
- No tax on income upto ₹3 lakh.
- 5% tax on income from ₹3 lakh to ₹6 lakh.
- 10% tax on income from ₹6 lakh to ₹9 lakh.
- 15% tax on income from ₹9 lakh to ₹12 lakh.
- 20% tax on income from ₹12 lakh to ₹15 lakh.
- 30% tax on income above ₹15 lakh.
Rates of Surcharge under New Tax Regime
| Total Income | Rate of Surcharge Applicable |
| Up to ₹50 Lakh | Nil |
| Above ₹50 Lakh and up to ₹1 Crore | 10% |
| Above ₹1 Crore and up to ₹2 Crore | 15% |
| Above ₹2 Crore and up to ₹5 Crore | 25% |
| Above ₹5 Crore | 25% |
Benefits of the New Tax Regime
With fewer deductions and exemptions , the tax filing process is more straightforward and less time-consuming.
For FY 2024-25 Key Benefits in New Tax Regime
Problems in New Tax Regime
No Deduction or Exemptions
All major exemptions and deductions become lapsed for salaried person such as HRA, LTA, Home Loan, 80C, 80TTA etc.
No Rebate against Special Income
No Rebate is allowed against tax liability for special income like Short Term Capital Gain, Long Term Capital Gain etc.
Tax Regime Selection before Due Date
The selection of Tax Regime must be done before the original due date (31st July). If the due date is over by default New Tax Regime will be selected.
Possibility of Regime Change
- If you are a Business Person, you can opt out only once and if opt out you cannot change it.
- If you are an individual, then you can change every year by choosing the option in ITR Form.
Exemption Thresholds under Section 87A
- New Tax Regime: Complete exemption for income under ₹7 lakh.
- Old Tax Regime: Exemption for income under ₹5 lakh.
How Much Can You Save Under the New Income Tax Regime?
| For Annual Income | Old Regime (Tax Payable) | New Regime (Tax Payable) | Savings |
| ₹7.5 Lakh | ₹49,036 | No tax payable due to Section 87A | ₹49,036 |
| ₹10 Lakh | ₹99,320 | ₹54,600 | ₹44,720 |
| ₹12.5 Lakh | ₹1,65,688 | ₹93,600 | ₹72,088 |
| ₹15 Lakh | ₹2,40,942 | ₹1,45,600 | ₹95,342 |
| ₹20 Lakh | ₹3,91,560 | ₹2,96,400 | ₹95,342 |
How to save tax for salary above 10 lakhs? Click Here
How to Save Tax if Salary is Above 5 Lakhs? Click Here
FAQs
New Tax Regime is better if you have not invested in any savings schemes.
Individuals with income from a business or profession can switch tax regimes only once in future. If you choose the new tax regime by filing Form 10IE, you cannot switch back to the old regime in subsequent years.
A salaried taxpayer can switch between the new and old tax regimes each year. Non-salaried taxpayer must choose the new regime when filing their tax return and does not need to declare their choice during the year.