Income Tax on Salaried Employees: Deductions, Rebates, and Exemptions 2025
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- by MI September 22, 2025
The financial year 2024–25 (Assessment Year 2025–26) brings several important updates for salaried employees in India. With reforms in the Income Tax Act, choosing between the old tax regime and the new tax regime is crucial for maximizing savings. This guide explains deductions, exemptions, rebates, and also compares tax slabs under old vs new regime in 2025.
1. Standard Deduction for Salaried Employees
The standard deduction continues in 2025:
- ₹50,000 deduction from taxable salary income.
- Applicable under both old and new regimes.
2. Popular Deductions under Section 80C, 80D, and Others
| Section | Deduction | Limit (FY 2024–25) |
|---|---|---|
| 80C | Investments in PPF, ELSS, Life Insurance, EPF, etc. | Up to ₹1.5 lakh |
| 80D | Medical insurance premium | ₹25,000 (₹50,000 for senior citizens) |
| 24(b) | Home loan interest (self-occupied) | Up to ₹2 lakh |
| 80E | Interest on education loan | No limit (max 8 years) |
| 80CCD(1B) | NPS additional contribution | Up to ₹50,000 |
3. Exemptions Available to Salaried Employees
- House Rent Allowance (HRA): Exempt based on salary, rent, and city of residence.
- Leave Travel Allowance (LTA): Exemption for domestic travel twice in 4 years.
- Gratuity: Exempt up to ₹20 lakh.
- Food & Transport Allowances: Exempt within prescribed limits.
4. Rebate under Section 87A (2025)
- Available if taxable income ≤ ₹7 lakh (new regime).
- Maximum rebate: ₹25,000.
- Zero tax liability for eligible salaried taxpayers.
5. Old vs New Tax Regime: Comparison for Salaried Employees (2025)
The following table shows the income tax slabs for salaried employees in India for FY 2024–25:
| Income Range | Old Tax Regime | New Tax Regime (Default from 2025) |
|---|---|---|
| Up to ₹2.5 lakh | No Tax | No Tax (₹3 lakh exemption limit) |
| ₹2.5 lakh – ₹5 lakh | 5% | 5% (₹3 lakh – ₹6 lakh) |
| ₹5 lakh – ₹10 lakh | 20% | 10% (₹6 lakh – ₹9 lakh) |
| ₹10 lakh – ₹12 lakh | 30% | 15% (₹9 lakh – ₹12 lakh) |
| ₹12 lakh – ₹15 lakh | 30% | 20% (₹12 lakh – ₹15 lakh) |
| Above ₹15 lakh | 30% | 30% |
Key Difference: The old regime allows deductions (80C, 80D, HRA, etc.), while the new regime offers simplified lower tax rates but with minimal exemptions.
Conclusion
Salaried employees in 2025 must carefully compare both regimes. Those with higher deductions (HRA, 80C, 80D, home loan, etc.) may benefit from the old regime, while others may save more under the new regime. Evaluating both before filing your ITR online ensures maximum tax savings.
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