Income Tax Slabs for FY 2025-26 (AY 2026-27): Complete Guide to New vs. Old Regime
The Union Budget 2025 brought major tax relief for individual taxpayers by revising the income tax slabs under the new tax regime. With an increased basic exemption limit and higher rebate, many individuals will pay zero tax on annual income up to ₹12 lakhs.
If you’re wondering how these changes affect you, this guide will help you understand the latest income tax slabs, differences between the old and new regimes, and strategies to choose the right option for FY 2025-26 (AY 2026-27).
Key Highlights for FY 2025-26
- Zero tax on income up to ₹12 lakhs due to enhanced rebate of ₹60,000 under Section 87A.
- Basic exemption limit raised from ₹3 lakhs to ₹4 lakhs under the new regime.
- The highest tax slab (30%) now applies on income above ₹24 lakhs, instead of ₹15 lakhs earlier.
- Higher TDS thresholds to reduce compliance for individuals.
- Standard deduction for salaried individuals increased to ₹75,000.
Income Tax Slabs – New Tax Regime (FY 2025-26)
Income Range (₹) | Tax Rate |
Up to ₹4,00,000 | Nil |
₹4,00,001 – ₹8,00,000 | 5% |
₹8,00,001 – ₹12,00,000 | 10% |
₹12,00,001 – ₹16,00,000 | 15% |
₹16,00,001 – ₹20,00,000 | 20% |
₹20,00,001 – ₹24,00,000 | 25% |
Above ₹24,00,000 | 30% |
💡Important Note:
If your taxable income is ₹12 lakhs or less, the rebate under Section 87A brings your tax liability to zero (excluding special income like capital gains, crypto earnings, or gaming income).
Income Tax Slabs – Old Tax Regime (FY 2025-26)
The old regime slabs remain unchanged for this year. However, it still offers multiple exemptions and deductions such as HRA, LTA, and Section 80C investments.
For Individuals Below 60 Years (Resident, NRI, and HUF)
Income Range (₹) | Tax Rate |
Up to ₹2,50,000 | Nil |
₹2,50,001 – ₹5,00,000 | 5% |
₹5,00,001 – ₹10,00,000 | 20% |
Above ₹10,00,000 | 30% |
For Senior Citizens (60–80 Years)
Income Range (₹) | Tax Rate |
Up to ₹3,00,000 | Nil |
₹3,00,001 – ₹5,00,000 | 5% |
₹5,00,001 – ₹10,00,000 | 20% |
Above ₹10,00,000 | 30% |
For Super Senior Citizens (Above 80 Years)
Income Range (₹) | Tax Rate |
Up to ₹5,00,000 | Nil |
₹5,00,001 – ₹10,00,000 | 20% |
Above ₹10,00,000 | 30% |
New vs. Old Tax Regime – Which is Better?
The new regime is simpler with lower tax rates, while the old regime allows more deductions and exemptions.
Aspect | Old Regime | New Regime |
Deductions & Exemptions | Extensive (HRA, LTA, 80C, 80D, etc.) | Very limited (e.g., NPS, standard deduction) |
Basic Exemption Limit | ₹2.5 – ₹5 lakh based on age | ₹4 lakh (flat) |
Rebate u/s 87A | ₹12,500 (up to ₹5 lakh income) | ₹60,000 (up to ₹12 lakh income) |
Standard Deduction | ₹50,000 | ₹75,000 |
Best For | Individuals with high deductions and investments | Middle-income earners or those with minimal deductions |
Quick Rule of Thumb:
- If you claim deductions above ₹5–6 lakhs, old regime might save you more tax.
If you don’t have major deductions, new regime is generally better.
Example Calculations
Example 1 – Income up to ₹12 Lakhs
- Income: ₹12,00,000
- Deductions: Minimal
Under the new regime, rebate makes the final tax = ₹0.
Old regime may still attract tax unless deductions are claimed.
Example 2 – Income ₹25 Lakhs + Large Deductions
- Gross Salary: ₹25,00,000
- HRA Exemption: ₹4,00,000
- Other Deductions (80C, 80D, NPS): ₹5,00,000
- Tax Under New Regime: ₹3,19,800
- Tax Under Old Regime: ₹3,00,144
➡️Old regime saves ₹19,656 here due to high deductions.
How to Save Taxes Under New Regime
Even with limited exemptions, you can still optimize tax liability:
- Employer’s Contribution to NPS (Section 80CCD(2))
- Deduction up to 14% of basic salary.
- Standard Deduction
- Salaried individuals get ₹75,000 deduction automatically.
- Optimize Salary Structure
Use tax-free perks like transport allowance, daily allowance, or company car leasing plans.
Major Changes Effective from 1st April 2025
- Slab Relaxation:
- 30% tax rate now applies on income above ₹24 lakhs (earlier ₹15 lakhs).
- Basic exemption raised to ₹4 lakhs.
- Higher Rebate:
- Full tax relief for incomes up to ₹12 lakhs.
- Higher TDS Thresholds:
- Less TDS deduction on small transactions.
- Extended Tax Benefits:
- Start-up tax benefits under Section 80-IAC extended till 2030.
- NPS withdrawals are now fully tax-free.
Surcharge and Cess
- Surcharge applies on tax (not income) if total income crosses ₹50 lakhs:
- ₹50L – ₹1Cr → 5%
- ₹1Cr – ₹2Cr → 15%
- ₹2Cr – ₹5Cr → 25%
- Above ₹5Cr → 25% (capped for new regime)
- Health & Education Cess: 4% on total tax + surcharge.
Conclusion
The revised tax slabs for FY 2025-26 make taxation simpler and more beneficial for middle-income earners.
- New regime: Best suited for individuals with limited deductions, offering hassle-free compliance and zero tax for incomes up to ₹12 lakhs.
- Old regime: Ideal for those with significant investments and exemptions.
💡Pro Tip:
Evaluate both regimes at the start of the financial year using a tax calculator. Choose the regime that results in lower tax liability and plan your investments accordingly.
FAQ
1. What are the income tax slabs for FY 2025-26 under the new tax regime?
The new regime offers zero tax up to ₹4,00,000, with progressive rates from 5% to 30%. Income up to ₹12 lakhs effectively becomes tax-free due to the enhanced rebate under Section 87A.
2. What is the basic exemption limit in the new tax regime for FY 2025-26?
The basic exemption limit has been raised to ₹4,00,000 in FY 2025-26.
3. What is the rebate available under Section 87A in FY 2025-26?
Taxpayers with income up to ₹12,00,000 are eligible for a rebate of ₹60,000 under Section 87A, making their tax liability zero (excluding special income like capital gains or lottery winnings).
4. What are the old regime income tax slabs for FY 2025-26?
The old regime slabs remain unchanged: Nil up to ₹2.5 lakh, 5% on ₹2.5–5 lakh, 20% on ₹5–10 lakh, and 30% above ₹10 lakh. Higher basic exemption applies for senior (₹3 lakh) and super senior citizens (₹5 lakh).
5. Which is better: old regime vs. new regime in FY 2025-26?
The new regime is simpler and suits taxpayers with fewer deductions, while the old regime benefits those claiming high deductions (HRA, LTA, 80C, etc.).
6. Can I pay zero tax if my income is ₹12 lakhs?
Yes, under the new regime, thanks to the Section 87A rebate, your tax liability becomes zero if income is ₹12 lakhs or less.
7. What deductions are allowed in the new tax regime?
The new regime allows limited deductions such as the standard deduction of ₹75,000 for salaried individuals and employer’s contribution to NPS under Section 80CCD(2).
8. What is the highest tax slab under the new regime for FY 2025-26?
The highest slab of 30% applies to income above ₹24,00,000 (earlier it was above ₹15,00,000).
9. How does surcharge apply under income tax in FY 2025-26?
Surcharge applies on tax if income exceeds ₹50 lakhs: 5% (₹50L–₹1Cr), 15% (₹1–2Cr), and 25% (above ₹2Cr, capped for new regime). A 4% health and education cess is levied additionally.
10. What10. How do I decide between the old and new tax regimes for FY 2025-26? mistakes should be avoided during GST registration?
Evaluate your deductions: if you claim more than ₹5–6 lakhs in deductions, the old regime may save tax. Otherwise, the new regime is usually more beneficial.
