Income Tax Brackets for AY 2024-25

Income Tax Brackets for AY 2024-25

For Assessment Year 2024-25 (income earned in Financial Year 2023-24), the new tax regime under Section 115BAC offered six progressive slabs from nil to 30%, with the Section 87A rebate making income up to ₹7 lakh effectively tax-free. The old regime preserved its familiar ₹2.5/5/10 lakh structure, rewarding only those with substantial, documented deductions. If you are filing today for AY 2026-27 or projecting for AY 2027-28, the two-regime architecture is identical — but the slab widths, standard deduction, and rebate ceiling have all shifted materially in the new regime's favour.

Why AY 2024-25 Numbers Still Matter in 2026

Most readers arriving at this article are dealing with one of three live problems:

1. A belated or revised return for FY 2023-24. The deadline for belated ITR filing under Section 139(4) for AY 2024-25 was 31 December 2024. If you missed it, your route is now a rectification under Section 154 or a response to a Section 148 or Section 142(1) notice. In that case, the AY 2024-25 slab rates apply with no exception — the wider slabs introduced for AY 2025-26 or AY 2026-27 do not apply retroactively.

1. A deferred tax computation or multi-year liability model. CFOs and finance heads building provisions need the exact historical rates, not a paraphrased approximation.

1. A regime-choice decision for the current year. Understanding how the slabs evolved from AY 2024-25 to AY 2026-27 explains why the new regime is now the dominant choice — and helps you identify the specific deduction threshold at which the old regime still wins.

If you are filing for income earned between April 2025 and March 2026, the live assessment year is AY 2026-27 and the return due date is 31 July 2026 for individuals and HUFs without a tax audit requirement. Income currently being earned in FY 2026-27 will be assessed in AY 2027-28.

The Two-Regime Framework: What Section 115BAC Actually Creates

Finance Act 2020 inserted Section 115BAC into the Income-tax Act 1961, offering individuals and Hindu Undivided Families (HUFs) a lower-rate, lower-exemption alternative to the existing structure. Finance Act 2023 changed the default: from AY 2024-25 onwards, the new regime became the opt-out option. Doing nothing means new-regime taxation.

The practical consequences are significant and often misunderstood:

• Employers must apply new-regime TDS on salary unless the employee submits a written declaration choosing the old regime. The declaration mechanism is Form 12BB.
• ITR forms since AY 2024-25 default to the new regime in the filing portal. You must actively select the old regime in Schedule Part A General.
• Salaried taxpayers can switch between regimes at the time of filing each year — but whatever you declare to your employer governs TDS for the full financial year. Mid-year switches inside payroll are disruptive and most employers do not accommodate them after June.
• Business and professional taxpayers (anyone with income under the head "Profits and Gains of Business or Profession") who wish to opt out of the new regime must file Form 10-IEA before the due date of the return. Miss the deadline and you are locked into the new regime for that entire year. Once you exercise the old-regime option as a business taxpayer, you cannot switch back in future years unless you permanently cease business income.

What the new regime disallows: House Rent Allowance (HRA) under Section 10(13A), Leave Travel Allowance (LTA) under Section 10(5), home-loan interest under Section 24(b), and virtually all Chapter VI-A deductions — including Section 80C (EPF, ELSS, PPF, LIC; ₹1,50,000 ceiling), Section 80D (medical insurance premiums), Section 80CCD(1B) (voluntary NPS top-up of ₹50,000), and Section 80E (education loan interest).

What the new regime allows: Standard deduction of ₹75,000 for salaried taxpayers and pensioners (raised from ₹50,000 from AY 2025-26 onwards); employer NPS contributions under Section 80CCD(2) up to 14% of salary for government employees and 10% for private-sector employees; gratuity and leave encashment exemptions.

AY 2024-25 Slabs in Full (Historical Reference)

New Regime — AY 2024-25 (Finance Act 2023)

Section 87A rebate (new regime): Full rebate if net taxable income does not exceed ₹7,00,000. Maximum rebate: ₹25,000. Income up to ₹7 lakh — ₹7,50,000 for salaried after the ₹50,000 standard deduction — was effectively tax-free.

Standard deduction (AY 2024-25): ₹50,000 for salaried individuals and pensioners in both regimes.

Old Regime — AY 2024-25 (Individuals Below 60 Years)

Senior citizens (60–79 years): basic exemption ₹3,00,000. Super senior citizens (80 years and above): basic exemption ₹5,00,000.

Section 87A rebate (old regime): ₹12,500 maximum if net taxable income does not exceed ₹5,00,000.

Health and Education Cess at 4% applied to income-tax plus surcharge for all taxpayers in all assessment years covered here.

How the Slabs Shifted: AY 2024-25 → AY 2025-26 → AY 2026-27

The following table shows the three parameters that most directly affect whether an average salaried taxpayer owes any tax at all:

Finance Act 2024 (for AY 2025-26) widened the 5% slab band to ₹3–₹7 lakh and raised the standard deduction to ₹75,000. Finance Act 2025 (for AY 2026-27) was the most aggressive restructuring since 115BAC was inserted: the basic exemption moved to ₹4 lakh, a new 25% slab was introduced for ₹20–24 lakh income, and the Section 87A rebate ceiling jumped from ₹7 lakh to ₹12 lakh — making the effective tax-free ceiling for a salaried person ₹12,75,000.

Current Slabs for AY 2026-27 (What You File Today)

New Regime — AY 2026-27

Section 87A rebate (AY 2026-27, new regime): Full rebate on tax up to ₹60,000 if net taxable income does not exceed ₹12,00,000. A salaried person earning up to ₹12,75,000 gross (NTI of ₹12,00,000 after ₹75,000 standard deduction) pays zero income-tax.

Old regime (AY 2026-27): Unchanged from AY 2024-25 in slab structure — ₹2.5/5/10 lakh boundaries for those below 60. Section 87A old-regime ceiling remains ₹5,00,000 with ₹12,500 maximum rebate.

Surcharge and Cess: Where High Earners Get Surprised

Slab rates are the headline; surcharge and cess determine the real marginal rate for income above ₹50 lakh. Skipping this step at the advance-tax estimation stage creates shortfalls that attract interest under Sections 234B and 234C.

Surcharge rates (consistent across AY 2024-25 to AY 2026-27):

This 25% surcharge cap under the new regime matters enormously for income above ₹5 crore. A taxpayer with ₹6 crore income choosing the old regime faces a 37% surcharge on the income-tax, pushing the effective marginal rate above 42%. Under the new regime, the cap holds at 25%, reducing effective marginal rate to approximately 39%. At this income level, the deductions available in the old regime are unlikely to offset the surcharge disadvantage — but always model both scenarios precisely.

Marginal relief applies at each surcharge threshold. Your incremental tax payable above a threshold cannot exceed the income itself above that threshold. This matters most for incomes between ₹50–51 lakh, ₹1–1.02 crore, and similar bands. Many taxpayers and even some preparers skip marginal relief computation and over-pay, then wait months for a refund.

Worked Example: Two Scenarios, One Taxpayer

Facts (FY 2025-26 / AY 2026-27): Salaried individual, age 38. Gross salary: ₹15,00,000.

Scenario A — Moderate Deductions (New Regime Wins)

Old regime computation:

• Gross salary: ₹15,00,000
• Less standard deduction: ₹75,000
• Less HRA exemption (documented): ₹1,20,000
• Less home-loan interest — Section 24(b): ₹2,00,000
• Gross Total Income: ₹11,05,000
• Less Section 80C (EPF + ELSS): ₹1,50,000
• Less Section 80D (self + family): ₹25,000
• Net Taxable Income: ₹9,30,000

Tax (old regime): Nil on ₹2,50,000 + 5% on ₹2,50,000 (= ₹12,500) + 20% on ₹4,30,000 (= ₹86,000) = ₹98,500. Add 4% cess: ₹3,940. Total: ₹1,02,440.

New regime computation:

• Gross salary: ₹15,00,000
• Less standard deduction: ₹75,000
• Net Taxable Income: ₹14,25,000

Tax (new regime, AY 2026-27 slabs): Nil on ₹4,00,000 + 5% on ₹4,00,000 (= ₹20,000) + 10% on ₹4,00,000 (= ₹40,000) + 15% on ₹2,25,000 (= ₹33,750) = ₹93,750. Add 4% cess: ₹3,750. Total: ₹97,500.

New regime saves ₹4,940 despite the taxpayer forfeiting ₹4,95,000 in deductions. The wider lower slabs absorb the difference.

Scenario B — Heavy Deductions (Old Regime Wins)

Same taxpayer, same salary. Now the facts change: home-loan interest rises to ₹3,50,000 (larger loan or second year of higher EMI), Section 80D rises to ₹50,000 (floater policy added for parents), and a voluntary NPS top-up of ₹50,000 under Section 80CCD(1B) is made.

Old regime NTI: ₹15,00,000 − ₹75,000 (std. deduction) − ₹1,20,000 (HRA) − ₹3,50,000 (Section 24(b)) − ₹1,50,000 (80C) − ₹50,000 (80D) − ₹50,000 (80CCD(1B)) = ₹8,05,000

Tax (old regime): Nil on ₹2,50,000 + 5% on ₹2,50,000 (= ₹12,500) + 20% on ₹3,05,000 (= ₹61,000) = ₹73,500. Add 4% cess: ₹2,940. Total: ₹76,440.

New regime: Unchanged at ₹97,500.

Old regime saves ₹21,060. The tipping point was not the existence of deductions but their combined quantum — ₹7,20,000 in allowable deductions versus ₹75,000 in the new regime. Every time your total legitimate deductions exceed approximately ₹5–6 lakh (depending on income level), the old regime tends to pull ahead.

How to Choose Your Regime: A Five-Step Process

Complete this exercise in April — before you submit Form 12BB to your employer or before your first advance-tax instalment on 15 June.

1. List every deduction you can document today. HRA requires valid rent receipts and the landlord's PAN if monthly rent exceeds ₹50,000. Home-loan interest requires a certificate from the lender. Section 80D requires premium payment receipts. Do not list deductions you cannot produce on demand; the AIS and TIS pre-populated on the income-tax portal now flags mismatches with SFT data.

1. Compute net taxable income under each regime using the slab tables for the assessment year in question. Old regime: gross salary minus standard deduction, HRA exemption, home-loan interest under Section 24(b), and all applicable Chapter VI-A items. New regime: gross salary minus ₹75,000 standard deduction only (plus Section 80CCD(2) employer NPS if applicable).

1. Apply the correct slab rates. Do not use AY 2024-25 rates for AY 2026-27 income. The brackets are materially different.

1. Add surcharge (if income exceeds ₹50 lakh) and 4% cess to both computations. Also check marginal relief at the nearest threshold.

1. Verify Section 87A eligibility. Under the new regime for AY 2026-27, if your NTI is at or below ₹12,00,000, the rebate wipes your liability completely. This single check can end the regime debate for most middle-income salaried taxpayers.

Declaration timeline for salaried employees: Most employers require Form 12BB declarations by April or early May. If you submit the old-regime declaration but your actual investments fall short later in the year, your employer will correct TDS in the January–March payslips — resulting in a large TDS deduction in the final quarter and cash-flow stress.

Advance tax for non-salaried income: If you have rental income, freelance income, capital gains, or interest income not fully covered by TDS, plan four instalment payments: 15 June 2026 (15% of estimated annual liability), 15 September 2026 (45% cumulative), 15 December 2026 (75% cumulative), and 15 March 2027 (100% cumulative). Getting the regime wrong at the first instalment creates a compounding shortfall under Section 234C at 1% per month on the under-paid amount.

Common Mistakes That Change Your Tax Bill by ₹50,000 or More

Applying the Wrong Assessment Year's Slabs

Regime confusion is most dangerous when handling rectification cases. Applying the AY 2026-27 87A rebate ceiling of ₹12 lakh to an AY 2024-25 rectification computation will generate an incorrect demand figure. The AY 2024-25 ceiling was ₹7 lakh. Use the slab tables specific to the year under assessment — every time.

Missing the Form 10-IEA Deadline as a Business Taxpayer

A freelancer, consultant, or partner in a firm who wants old-regime taxation for AY 2026-27 must have filed Form 10-IEA on the income-tax portal on or before 31 July 2026 (or the extended deadline as notified by CBDT for that year). Late filing means automatic new-regime taxation for the entire year regardless of investments made. The portal does not accept Form 10-IEA after the return due date.

Offsetting Capital Gains Tax With the Section 87A Rebate

The Section 87A rebate reduces tax on income chargeable at slab rates only. It does not offset the tax on:

• Short-term capital gains (STCG) on listed equity shares and equity mutual funds, taxed at 20% under Section 111A
• Long-term capital gains (LTCG) above ₹1,25,000 on listed equity, taxed at 12.5% under Section 112A
• Any other special-rate income under Sections 112, 115BB, etc.

A salaried taxpayer with ₹11,50,000 salary income (NTI ₹10,75,000 after standard deduction) and ₹2,00,000 STCG under Section 111A cannot use the 87A rebate to cover the 20% STCG tax. The rebate ceiling applies to the total income but the rebate itself cannot be set against special-rate tax. The income-tax portal enforces this at the computation stage — do not model otherwise.

Claiming Deductions Not Visible in AIS/TIS

The Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) on the income-tax portal aggregate data from financial institutions, mutual fund registrars, property registrars, and employers. If your Form 26AS and AIS show ₹80,000 in 80C-eligible EPF contributions but you are claiming ₹1,50,000 under 80C, the delta will trigger a mismatch notice from CPC Bengaluru (the Centralised Processing Centre). Document every rupee of every deduction before filing.

Ignoring Marginal Relief Near Surcharge Thresholds

A taxpayer with income of ₹50,10,000 owes 10% surcharge on the entire income-tax computed on ₹50,10,000. But marginal relief limits the additional tax versus a taxpayer at ₹50,00,000 to ₹10,000 (the excess income). Without applying marginal relief, you can overpay by ₹30,000–₹50,000 depending on your slab position. This is a mechanical formula error — not a grey area — but it recurs every filing season.

Key Takeaways

• AY 2024-25 slabs are fixed by statute and cannot be revised retroactively. New regime: nil–30% across six bands from ₹3 lakh. Old regime: nil–30% across three bands from ₹2.5 lakh. Use these rates — and only these rates — for any AY 2024-25 rectification, revised return, or demand response.
• The new regime has been the default since AY 2024-25. Inaction equals new-regime taxation. Old-regime opt-in requires an active declaration: Form 12BB for salaried taxpayers, Form 10-IEA (filed before the return due date) for business and professional taxpayers.
• For AY 2026-27, the new regime is dramatically more attractive than it was in AY 2024-25: basic exemption at ₹4 lakh, seven slabs including a new 25% band, and a Section 87A rebate that eliminates all tax for salaried individuals with income up to ₹12,75,000.
• The regime decision is not universal — it depends on your specific deduction quantum. Run the arithmetic for your own numbers each year. Deductions exceeding approximately ₹5–6 lakh (combining HRA, home-loan interest, 80C, 80D, and NPS) typically tip the balance toward the old regime.
• The Section 87A rebate does not apply to special-rate income. Capital gains taxed under Sections 111A, 112, and 112A sit outside the rebate — even if your total income is under the rebate ceiling.
• Surcharge and cess are mandatory additions, not optional. Above ₹50 lakh, always model surcharge precisely under both regimes. The new regime's 25% surcharge cap (versus 37% under the old regime for income above ₹5 crore) is a concrete and significant advantage for very high earners.
• Missed deadlines compound the original tax problem. Section 234B interest (1% per month on unpaid advance tax), Section 234C interest (1% per month per instalment shortfall), and late-filing fees under Section 234F (up to ₹10,000) can collectively dwarf the regime-choice difference. File on time, declare your regime on time, and pay advance tax on time — in that order.