How India Income Tax Works — FY 2024-25
India offers two tax regimes: the New Regime (default since FY 2023-24) with lower slab rates but almost no deductions, and the Old Regime which allows deductions like Section 80C, HRA, and home loan interest. For most salaried employees, the New Regime is better unless total deductions exceed roughly ₹3.75 lakh. The Section 87A rebate makes income up to ₹7 lakh effectively zero-tax under the New Regime after the ₹75,000 standard deduction for salaried workers.
| Taxable Income (New Regime) | Tax Rate |
|---|---|
| ₹0 – ₹3,00,000 | 0% |
| ₹3,00,001 – ₹7,00,000 | 5% (→ 0% via 87A rebate for income ≤ ₹7L) |
| ₹7,00,001 – ₹10,00,000 | 10% |
| ₹10,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
- →Standard deduction: ₹75,000 for salaried employees and pensioners under New Regime (increased from ₹50,000 in Budget 2024). Self-employed do not get a standard deduction.
- →Health & Education Cess: 4% added on all income tax — applies after the 87A rebate.
- →Section 80C (Old Regime): up to ₹1,50,000 deduction for EPF, PPF, ELSS funds, LIC premium, NSC, home loan principal repayment, tuition fees, and more.
- →EPF (Employee Provident Fund): 12% of basic salary deducted from payroll (employer also contributes 12%). The employee share is included in 80C for Old Regime filers.
- →NPS (National Pension System): additional 80CCD(1B) deduction of ₹50,000 over and above 80C limit — only under Old Regime.
- →Surcharges apply for high income: 10% surcharge on income between ₹50L–₹1Cr, 15% on ₹1Cr–₹2Cr, 25% on ₹2Cr+ (New Regime rates).
- →File ITR-1 (Sahaj) if you have only salary, one house property, and other income ≤ ₹5,000. Deadline: July 31.
Frequently Asked Questions
New Regime vs Old Regime — which is better for me?
The New Regime is better when your total deductions and exemptions are less than approximately ₹3.75 lakh (the break-even varies by income level). If you have significant 80C investments (₹1.5L), HRA exemption, home loan interest deduction (Section 24), and NPS (₹50k), the Old Regime often wins for mid-to-high income earners. Use this calculator with both regimes toggled to compare. From FY 2023-24, the New Regime is the default — you must explicitly opt for the Old Regime in your ITR.
What is the Section 87A rebate and who qualifies?
The Section 87A rebate gives a full tax rebate (up to ₹25,000) for New Regime filers whose net taxable income is ₹7,00,000 or less after the standard deduction. This means a salaried person earning ₹7,75,000 gross pays zero income tax: ₹7,75,000 minus ₹75,000 standard deduction = ₹7,00,000 taxable income, which falls within the rebate. Under the Old Regime, the rebate is ₹12,500 for taxable income up to ₹5,00,000.
How is EPF taxed in India?
EPF contributions from employees are deductible under Section 80C (Old Regime only, up to ₹1.5L combined 80C limit). Interest on EPF is tax-free up to 9.5% p.a. Employer contributions up to 12% of basic salary are also tax-free. However, interest on employee contributions above ₹2.5 lakh/year (or ₹5 lakh if no employer contribution) became taxable from FY 2021-22. Withdrawals after 5 continuous years of service are fully tax-free.
What are the income tax filing deadlines in India?
ITR filing deadline for salaried individuals and non-audit cases: July 31. For businesses requiring audit: October 31. For transfer pricing cases: November 30. Filing a belated return (after July 31) attracts a late fee of ₹5,000 (₹1,000 if taxable income is below ₹5 lakh). Advance tax is due in four installments: June 15 (15%), September 15 (45%), December 15 (75%), and March 15 (100% of annual liability).