Income Tax Slabs for FY25: Winners, Losers, and What You Must Know Before Filing

The financial year 2025 brings with it significant updates to India's income tax structure. With the government pushing for wider adoption of the new tax regime, many taxpayers are reevaluating their filing strategies. But are these changes truly beneficial for all? Or do they tilt in favor of specific income groups?

In this detailed guide, we break down the revised income tax slabs for FY25, explain the critical differences between the old and new tax regimes, and explore who stands to gain—or lose—from this shift.

1. The Two-Tax-Regime System: A Quick Recap

Since FY21, taxpayers have had the option to choose between:

• Old Tax Regime: Higher tax rates but with the ability to claim deductions like 80C, 80D, HRA, and more.

• New Tax Regime: Lower tax rates with no major deductions allowed.

For FY25, the government has made the new tax regime the default, as announced in the Union Budget 2024. However, taxpayers can still opt for the old regime while filing returns.

Source: Income Tax Department – Tax Regime Comparison

2. Income Tax Slabs for FY25: Old vs New

Old Tax Regime (FY25)

Standard deductions and various exemptions are allowed.

New Tax Regime (FY25)

Standard deduction of ₹50,000 is now available under the new regime (from FY25).

3. Who Benefits from the New Regime?

✅ Middle-Income Earners (₹7 lakh to ₹15 lakh)

Thanks to lower tax slabs and the rebate under Section 87A, individuals earning up to ₹7 lakh effectively pay zero tax under the new regime.

For those earning between ₹9–12 lakh, the effective tax rate is lower compared to the old regime, even without deductions. According to a PwC India Tax Guide, most salaried professionals who don't claim multiple exemptions find the new regime more rewarding.

✅ Younger Professionals

Younger taxpayers with fewer loans or insurance-based investments benefit as they don’t rely on deductions like home loan interest or ELSS. They pay lower taxes without the need to navigate complex deductions.

4. Who Might Lose Out?

❌ High-Income Individuals with Heavy Deductions

Individuals in the ₹15 lakh+ bracket who invest in 80C instruments (like PPF, ELSS), claim housing loan interest, HRA, NPS, or tuition fees under the old regime could save more taxes than they would under the new structure.

A high earner maximizing deductions under old rules can reduce taxable income by ₹3-4 lakh, something the new regime doesn’t allow.

❌ Retired Individuals with Medical Expenses and Savings

Senior citizens often depend on deductions like 80D (medical insurance) and 80TTB (interest from savings accounts and FDs). The old regime provides more benefits for retirees managing fixed incomes and health expenses.

Read: ET Wealth’s breakdown on tax-saving strategies for retirees

5. Comparing Take-Home Pay: Old vs New

Here’s a practical comparison for a salaried individual earning ₹12 lakh annually:

• Old Regime (after ₹2 lakh in deductions):

  • Taxable Income: ₹10 lakh

  • Tax Liability: ~₹1.12 lakh (after rebate and cess)

• New Regime (no deductions):

  • Taxable Income: ₹11.5 lakh (after standard deduction)

  • Tax Liability: ~₹1.25 lakh

Result: The old regime is more beneficial if you claim significant deductions.

Use Cleartax’s Regime Comparison Calculator to see which works best for your case.

6. Important Policy Changes in FY25

• Default Regime: New tax regime is now the default option. Taxpayers must explicitly opt for the old regime in ITR forms.

• Standard Deduction: A ₹50,000 standard deduction is now allowed in the new regime—previously available only under the old regime.

• Surcharge Cap: The surcharge rate on income above ₹5 crore is capped at 25% under the new regime, reducing the effective tax rate from 42.74% to 39% for ultra-high-net-worth individuals.

These policy shifts indicate the government's intention to gradually phase out the old tax system in favor of a simplified structure.

7. Choosing the Right Regime: What Should You Do?

Here’s a practical approach:

• Choose the new regime if:

  • You don't claim multiple deductions

  • You’re early in your career with basic salary components

  • Your income is below ₹7 lakh

• Stick with the old regime if:

  • You claim home loan interest, HRA, Section 80C investments

  • You have high insurance premiums, education loans, or dependent expenses

  • You’re a senior citizen with eligible medical deductions

8. Expert Opinion

According to Archit Gupta, CEO of Clear by ClearTax,

“While the new regime simplifies tax filing, it penalizes those who proactively save and invest. Taxpayers must evaluate their financial situation annually before making a choice.”

Conclusion: Don’t File Without Comparing

The FY25 income tax slabs are more than just numbers—they represent a structural pivot in how India wants its citizens to save, spend, and pay taxes. The government is nudging people toward consumption-based spending, while reducing dependency on tax exemptions.

However, one size doesn’t fit all. Taxpayers must carefully evaluate their deduction claims, future financial goals, and income stability before choosing the appropriate regime. The decision you make now will directly impact your take-home pay and long-term savings.