What are the NRI Tax Slab and Rates for FY 2024-2025 For NRIs?

Taxation in India is important to the nation's economy. Taxes are a way to improve the services and products that consumers use. Taxes are charged on various services and products that Indian citizens use in different ways. The taxation system of India is progressive, meaning the tax rates will increase with higher levels of income.

Income tax, service tax, property tax, tax deducted at source, etc., are some of the terms that most of the Indian people are familiar with. On the other hand, for NRIs, the only tax aspect they need to consider is Income Tax. The income tax slab rates in India define the rates that are applicable for different incomes. It may differ depending on the type of taxpayer, residential status, and age.

The applicable income tax slabs and rates might change every financial year, depending on the announcements made by the government. There are two tax regimes: the new tax regime and the old tax regime. In this blog, we will cover the income tax slabs that are applicable for the current financial year. Before that, let's understand a little more about what the income tax slab is.

What is the Income Tax Slab?

The Income Tax Slab was introduced to promote a fair taxation system across the country. In India, taxpayers are required to pay income tax depending on the income tax slab that matches their income levels. These income tax slabs feature various income ranges, each associated with different income tax rates. Tax obligations also increase alongside the increase in income. Taxpayers must complete their Income Tax Return (ITR) filing by the specified deadline based on these income tax slabs. Changes to the income tax slabs are announced during the budget. The old tax regime divided the slab into three categories based on an individual's age, while the new regime eliminates such classifications.

The Indian direct tax structure is also divided into the old and new regimes. The taxpayer has the option to choose one that provides more benefits while filing the ITR.

Income Tax Slab Under New Regime for FY 2025-2026 (AY 2026-2027)

The following table shows the revised income tax slab rates according to Budget 2025 under the new regime:

Point to Note: The increased slab rates only apply under the new regime and will be put into action for ITR filing for FY 2025-2026 (AY 26-27)

Increased Tax Rebate Limits In Budget 2025

According to the 2025 Budget, the income tax rebate limit has been changed and increased to INR 12 lakhs. In the budget 2024, this limit was increased from Rs. 5 lakhs to Rs. 7 lakhs under the new tax regime: 

Note: You are also allowed to claim a deduction of INR 75,000 over and above the limit of INR 12 lakhs. This way, the total tax-free income will become Rs. 12.75 lakhs.

Income Tax Slab FY 2024-2025 (AY-2025-2026)

New Regime (FY 2024-2025)

Old Regime (FY 2024-2025)

Differentiating Between the Tax Rates of the Old Tax Regime and the New Tax Regime 

Note: According to Budget 2025, the rebate under section 87A has been increased to INR 60,000, which means income up to Rs. 12 lakh will be tax-exempt. However, this rebate is only applicable under the new regime and will be effective for ITR filing for the FY 2025-2026 (AY 2026-2027). 

Comparison Between Old Tax Regime vs New Tax Regime

The Indian direct tax system is divided into the old regime and the new regime, with each offering various exemptions and advantages:

New Tax Regime

The new regime provides lower tax rates for higher income brackets compared to the old tax regime, and it allows taxpayers to reduce their tax liabilities under specific conditions, although choosing this regime is optional. If you opt for the new tax regime to calculate your taxes, you will miss out on most deductions and exemptions that are available under the Income Tax Act of 1961.

Nonetheless, with the Budget 2023, 2025, and 2025, the government has introduced a few changes, aimed at enhancing the appeal of the new tax regime:

Old Tax Regime

Regarding the old tax regime, it refers to the income tax calculation system and slabs that were in place before the new tax regime. It is often referred to as the existing tax regime. Under the old tax regime, individuals could claim numerous tax deductions and exemptions, allowing them to lower their taxable income. This regime offers over 70 deductions and exemptions, including provisions under section 80C, HRA, LTA, among others. There have been no changes to the slab rates in the old tax regime.

Point to Note: Under the old tax regime, the basic exemption limit for an individual aged above 60 years and below 80 years is Rs. 3,00,000. Under the new tax regime, the basic exemption limit for individuals aged above 80 years is Rs. 5,00,000.

Features of the New Tax Regime

• Lower Tax Rates

The new tax regime offers lower tax rates in various slabs:

• Easier Compliance:
  • There is no need to manage comprehensive documentation for exemptions or deductions.
• Increased Take-Home Pay:
  • It can benefit those people who don't have any major tax-saving investments
• No Deductions or Exemptions:
  • Only the standard deduction of Rs. 75,000 is permitted, which came into effect from Budget 2024.
  • Numerous deductions and exemptions are not available, including 80C, HRA, and LTA.
• Ideal for Specific Taxpayers:
  • The new tax regime is suitable for those individuals who have fewer or no investments and deductions.

Features of the Old Tax Regime

• Higher Tax Rates:
  • In the old tax regime, NRI tax slabs had higher rates for numerous ranges of income.
• Exemptions and Deductions:
  • Exemptions were available for allowances, such as transport allowance and food coupons.
  • It permits several deductions like:
    • Standard deduction: Rs. 50,000 for salaried individuals.
    • Section 80D: Medical insurance premium
    • Section 80C: Rs. 1.5 lakhs for investments, such as ELSS, PPF, etc.
    • Leave Travel Allowance (LTA) and House Rent Allowance (HRA)
• Suitable for Specific Taxpayers:
  • In contrast to the new tax regime, the old tax regime is ideal for those who have high eligible deductions and exemptions.

How to Choose Between the Old and New Regime?

Consider the following points to make a choice between the old and new regimes:

• Taxpayers can choose a regime that is more beneficial to them.
• The old regime is ideal for those individuals who have significant investments/deductions
• The new regime is suitable for those having minimal tax-saving options.

Income Tax Slab Rates for FY 2024-2025 (AY 2025-2026) Depending on Residential Status

Income tax rate for residents and HUF (Hindu Undivided Families)

Income Tax Rate for Non-resident Individual 

Note: In the case of the resident, a surcharge and cess also apply.

Tax Slabs for Domestic Companies 

Note:

• A company that has opted for special rate taxation under section 115BAA and 115BAB does not have to pay MAT (Minimum Alternate Tax).
• MAT shall be paid at 9%, including applicable cess and surcharge, if the company is a unit of an international financial services center and receives its income only in convertible foreign exchange.
• A company must be subject to pay MAT at 15% of the book profit, as well as the applicable surcharge and health and education cess. In this, the normal tax liability of the company shall be less than 15% of the book profit.
• Companies that opt for a special rate of taxation under section 115BAA or 15BAB will not benefit from specific deductions, such as section 801A, 801AB, 801AC, 801B, etc., except for deductions under section 80JJAA and 80M.

Applicable Income Tax Rate for a Foreign Company

AY (Assessment Year) 2024-2025

AY (Assessment Year) 2025-2026

Additionally:

(a) Surcharge: The income tax will be increased by a surcharge of 2% on the tax amount for total income that exceeds one crore rupees but does not exceed ten crore rupees. For income exceeding ten crore rupees, the surcharge is raised to 5%. However, this surcharge comes with a provision for marginal relief, which is as follows:

(i) For income above one crore rupees but up to ten crore rupees, the combined total of income tax and surcharge cannot exceed the tax amount payable on one crore rupees by more than the income that exceeds one crore rupees.

(ii) For total income over ten crore rupees, the total payable income tax and surcharge amount must not exceed the tax amount computed on ten crore rupees by more than the income over that limit.

(b) Health and Education Cess: In addition to the income tax and applicable surcharge, a health and education cess of four percent will be applied to the total of the income tax and surcharge.

Minimum Alternate Tax (MAT)

A foreign company must pay the Minimum Alternate Tax (MAT) if the tax is determined on its total income as per the normal provisions of the law, and is less than 15% of its "book profit". In this case, "book profit" becomes the basis for tax calculation, which is set at a rate of 15%. However, the MAT provisions do not apply to foreign companies that don't have a permanent establishment (PE) in India or choose to follow the presumptive taxation schemes outlined in Section 44B, Section 44BB, or any other sections specified in a certain regulation.

What are the Applicable Exemptions and Deductions for an NRI?

NRIs' income is mostly liable to a heavy TDS (Tax Deducted At Source), which often results in NRIs paying more tax than their actual liability. Hence, understanding the applicable deductions that can be availed as Non-resident Indians (NRIs) is vital. The deductions that an NRI can claim as per NRI taxation rules are as follows:

• LTCG (Long-term capital gains)
  • LTCG from a property held for 36 months or more can be invested in other property, and the transaction amount will be exempted.
• Section 80D
  • Health insurance premiums for the immediate family and dependents.
  • Preventive health check-ups for up to a maximum of Rs. 5000.
• Section 80G
  • Donations according to Section 80G.
• Section 80E
  • Interest deduction paid on an education loan for higher studies of self, spouse, children, or a dependent student, subject to the earlier of a period of around 8 years or till the interest is paid.
• Section 80TTA
  • A maximum of Rs. 10,000 on interest from a savings bank account.
• Section 80C
  • Investment in ULIPs
  • Tuition fee payment
  • Payment of life insurance premiums
  • Deduction from house property income
  • Principal payment on the loan for the purchase of a residential property

What are the Surcharge Rates for an NRI?

• The Surcharge rate is 15% of the income tax that is payable on the total income that is more than Rs. 1 crore but up to Rs. 2 crore.
• 25% of income tax payable, if total income exceeds Rs. 2 crore but up to Rs. 5 crore.
• Surcharge rate is 37% of the income tax payable on total income exceeding Rs. 5 crore.
• 10% of income tax if the total income exceeds Rs. 50 lakhs, but not Rs. 1 crore.
• The surcharge is conditional on marginal relief and will be applicable to the income of an NRI also. ;

Note: Under the new tax regime, the maximum surcharge must be 25%.

Additional Points

• Compare your tax liability carefully under both regimes before choosing one. You can make use of a tax calculator online to get more help.
• You can change between the new and old regimes annually at the time of filing your tax returns.
• When making a decision, consider your future income growth and investment plans.

Conclusion

The Old vs New Tax Regime provides you with clarity on all the calculations and a detailed comparison on how much your taxability will be according to both old and new regimes, so that it becomes easier for you to choose the one that is suitable for you. If you are confused about which tax regime is ideal for you or if you find filing an ITR complex, then you can seek assistance from the experts at Savetaxs.

Our expert team of CAs at Savetaxs will help you to file your ITR easily. They bring an experience of over 30 years and can help you complete your income tax return filing easily, and that too without leaving the comfort of your home.