Understanding Indian Income Tax for Financial Year 2024-2025

Overview of Indian Income Tax

The Indian income tax system is crucial for the country's economic structure, impacting individuals and corporations. For the financial year 2024-2025, the tax regulations remain significant for taxpayers as they navigate their responsibilities. The Indian tax system operates on a financial year basis, ending on March 31st, and taxpayers must report their income and compute the applicable taxes accordingly.

Income Tax Brackets for 2024-2025

For the year 2024-2025, the income tax brackets in India continue to be structured progressively. Here’s a simplified overview of the tax slabs for individuals:

old regime:

• Up to ₹2.5 lakhs: No tax

• Income from ₹2,50,001 to ₹5,00,000: 5%

• Income from ₹5,00,001 to ₹10,00,000: 20%

• Income from ₹10,00,001 to ₹50,00,000: 30%

• Income from ₹50,00,001 to ₹100,00,000: 30% + 10% surcharge

• Income from ₹100,00,001 to ₹200,00,000: 30% + 15% surcharge

• Income from ₹200,00,001 to ₹500,00,000: 30% + 25% surcharge

• Income above ₹500,00,001: 30% + 37% surcharge

new regime:

• Up to ₹3.0 lakhs: No tax

• Income from ₹3,00,001 to ₹7,00,000: 5%

• Income from ₹7,00,001 to ₹10,00,000: 10%

• Income from ₹10,00,001 to ₹12,00,000: 15%

• Income from ₹12,00,001 to ₹15,00,000: 20%

• Income from ₹15,00,001 to ₹50,00,000: 30%

• Income from ₹50,00,001 to ₹100,00,000: 30% + 10% surcharge

• Income from ₹100,00,001 to ₹200,00,000: 30% + 15% surcharge

• Income above ₹200,00,001: 30% + 25% surcharge

These brackets apply to individual taxpayers below 60 years of age. For senior citizens (60 years and above) and very senior citizens (80 years and above), the initial exemption limit increases, aiding tax savings.

More details are available on income tax government website.

Investment Options for Tax Savings

To curb tax liability, taxpayers can explore various investment avenues sanctioned by the Income Tax Act. One popular option includes investing in Life Insurance Corporation (LIC) policies. Premiums paid towards LIC policies qualify for deductions under section 80C, up to ₹1.5 lakhs. This not only secures your family's future but also helps save on income tax.

For instance, consider an individual earning ₹8 lakhs annually. By investing ₹1.5 lakhs in an LIC policy, this taxpayer can effectively bring down their taxable income to ₹6.5 lakhs. This adjustment translates into a significant tax saving, as the income at this level is taxed at 20%, leading to a lower overall tax burden.

In addition to LIC policies, other investment instruments like Public Provident Fund (PPF), National Pension System (NPS), and Equity Linked Savings Schemes (ELSS) further enhance tax savings under the same section. These investments not only provide tax benefits but also pave the way for future financial stability.

In summary, understanding the intricacies of the Indian income tax system for the financial year 2024-2025 is essential for every taxpayer. By leveraging tax brackets and smart investment strategies, such as LIC policies, individuals can optimize their tax obligations while planning for a secure future.