A look at current income tax rates and deduction before budget 2025 – CNBC TV18

The upcoming budget 2025 has discussed the possible changes in tax rates and deductions. Individual taxpayers, who saw limited changes in the budget of July 2024, are now hopeful of meaningful reforms to reduce financial pressure and increase savings.

Dual tax governance system -Old Tax Governance (OTR) and new tax governance (NTR) -Has provided flexibility, but added confusion.

Taxpayers often switch between regulations, uncertain that do the best work for them.

BDO India partner Deepashree Shetty highlighted the need for a simple tax structure, saying, “The government should focus on improving taxpayers by introducing reforms like governance and increased cuts.”

Experts believe that old tax regime can eventually make way for a single, streamlined structure.

“A gradual time line, targeting FY 2026-27, can ensure equally a smooth transition to taxpayers and institutions,” Shetty said.

Taxpayers hope that the budget will be from 2025:

• Increase the exemption limit from ₹ 3 lakh to ₹ 5 lakh.
• Promote disposable income for middle class taxpayers.
• Introduce 25% slab for income between ₹ 15 lakh and ₹ 20 lakh.
• Adjust 30% slab to start from ₹ 20 lakh instead of ₹ 15 lakh.
• Include deduction in new tax regime
• Allow Section 80C deduction (2 lakh) for savings like life insurance and PF.
• For health insurance, increase Section 80D deduction to ₹ 1 lakh.
• For salaried persons, restore HRA deduction under Section 10 (13A).

In view of these, let’s see the current tax rates for FY 2024-25 (Ay 2025-26):

Tax is introduced to simplify the filing, the new tax regime eliminates most cuts and discounts. However, it facilitates low tax rates:

• Up to ₹ 3 lakh: Nil
• ₹ 3 lakh to ₹ 6 lakh: 5%
• ₹ 6 lakh to ₹ 9 lakh: 10%
• ₹ 9 lakh to ₹ 12 lakh: 15%
• ₹ 12 lakh to ₹ 15 lakh: 20%
• Over ₹ 15 lakh: 30%

Old tax governance is popular among taxpayers who claim deduction for investment, housing loans and health insurance. Tax slabs are for persons less than 60 years:

• Up to ₹ 2.5 lakh: Nil
• ₹ 2.5 lakh to ₹ 5 lakh: 5%
• ₹ 5 lakh to ₹ 10 lakh: 20%
• Over ₹ 10 lakh: 30%

Old tax regime allows cuts such as:

• Section 80C: ₹ 1.5 lakh for investment in PF, ELSS, LIC premium, etc.
• Section 80D: ₹ 25,000 for health insurance premium (50,000 for senior citizens).
• HRA: Claimable for taxpayers paying salary.
• Section 24 (B): up to ₹ 2 lakh for home loan interest

While the new tax regime provides a simple structure with low rates, it provides no space for cuts, which many individuals rely to reduce their taxable income.

Conversely, the old tax regime allows various discounts and deductions but comes with high tax rates.