Income Tax Slabs and Rates for Financial Year 2025-26 (Assessment Year 2026-27)
- Rajesh Kumar Kar
- Apr 30
- 9 min read
Updated: May 2
While presenting the Union Budget 2025, Finance Minister Nirmala Sitharaman modified the income tax slabs as a part of the new tax system. For the upcoming financial year 2025–2026, the new income tax slabs as per the new tax regime will effectively apply from April 1, 2025. Under the new tax system, the income tax slabs have been through a radical transformation. In this article, we will explain these new slabs and rates in detail.
Table of Content
Income Tax Slabs and Rates for FY 2025-26
The income tax slabs under the new tax regime are under consideration for the upcoming year 2025–2026. The impending changes will benefit taxpayers who struggle to reduce their income tax liability through savings and investments. The highest tax rate of 30% will be applied to incomes beyond Rs 24 lakh under the proposed tax structure, rather than the present Rs 15 lakh.
Income Tax Slabs | Income Tax Rates |
Up to Rs.4 lakh | NIL |
Rs. 4 lakh - Rs.8 lakh | 5% |
Rs.8 lakh - Rs.12 lakh | 10% |
Rs.12 lakh - Rs.16 lakh | 15% |
Rs.16 lakh - Rs.20 lakh | 20% |
Rs.20 lakh - Rs.24 lakh | 25% |
Above Rs.24 lakh | 30% |
Because of the higher Rs. 60,000 refund under the new tax system, anyone earning up to a threshold limit of Rs. 12 lakhs will not be required to pay any taxes. The standard deduction of Rs. 75,000 will eliminate the tax load of salaried individuals with incomes up to Rs. 12.75 lakhs. The rebate's minor relief is still in effect. Income subject to special rates of taxation, such as capital gains under section 112A, is not eligible for the refund. Section 202 of the New Income Tax Bill, 2025, provides the new tax framework under section 115BAC. If approved, the law will become the new Income Tax Act, taking effect on April 1, 2026.
Impact of New Tax Regime
The new tax structure will be much more appealing than the old one thanks to the anticipated changes. Adjustments were made in February 2023 to make the new tax structure more attractive to individual taxpayers. A number of adjustments were made, including raising the basic exemption threshold, introducing the standard deduction, and increasing the tax rebate under Section 87A for taxable income up to Rs 7 lakh. In the July 2024 budget, the government announced further changes to the income tax slabs under the new tax system.
Income Tax Slabs and Rates for FY 2024-25 as per the Old Regime
The budget for 2024 made no adjustments to the tax slabs that existed during the previous administration. Under the previous administration, the tax slabs were as follows:
Income Slabs | Age < 60 years & NRIs | Age of 60 Years to 80 years (Resident Individuals) | Age above 80 Years (Resident Individuals) |
Up to Rs.2.5 lakh | NIL | NIL | NIL |
Rs.2.5 lakh - Rs.3 lakh | 5% | NIL | NIL |
Rs.3 lakh - Rs.5 lakh | 5% | 5% | NIL |
Rs.5 lakh - Rs.10 lakh | 20% | 20% | 20% |
Rs.10 lakh and above | 30% | 30% | 30% |
Income Tax Slabs and Rates for FY 2024-25 as per the New Regime
The government has changed the tax slabs for FY 2024–2025 under the new regime. As a result, several relaxations have occurred. The following summarizes the main adjustments made to the slab rates:
Income tax slabs (Rs) | Income tax rate (%) |
Up to Rs 3 lakh | 0 |
Rs 3 lakh-Rs 7 lakh | 5 |
Rs 7 lakh-Rs 10 lakh | 10 |
Rs 10 lakh-Rs 12 lakh | 15 |
Rs 12 lakh-Rs 15 lakh | 20 |
Rs 15 lakh and above | 30 |
Features of New Tax Regime
The default tax regime is the new one. In any financial year, if there is no company income, an individual may opt to continue under the previous tax system.
For all individual categories—individuals, senior citizens, and super senior citizens—the tax rates under the new tax regime are the same.
If the total income is less than Rs. 7,00,000, a tax refund of up to Rs. 25,000 is available (not applicable for NRIs). Therefore, income up to Rs. 7,00,000 is exempt from taxes.
Under the new system, salaried employees will get a standard deduction of Rs. 75,000.
From Rs. 15,000 to Rs. 25,000, the deduction for family pensions received has been increased.
For FY 2024–2025, the employer's NPS contribution deduction cap is 14%.
Under the new regime, the highest surcharge rate is 25%, whereas under the old regime, it was 37%.
A salaried employee may save up to Rs. 17,500 in taxes under the new tax regime as a result of the aforementioned adjustments. People must submit Form 10-IEA if they wish to stick with the previous regime.
Understanding the Applicable Income Tax Slab
Every fiscal year, individuals without business incomes must select between the two tax regimes. An individual must also be aware of the income tax slabs that correspond to their income. An individual can use these two considerations to assist them decide which income tax system is best for them. One must first determine the taxable income on which tax must be calculated in order to determine the income tax slabs and rates that apply to their income under any income tax system. An individual can claim tax exemptions (such as the House Rent Allowance, Leave Travel Allowance, and standard deductions) and deductions under sections 80C to 80U if they continue to follow the previous tax regime. An individual determines their net taxable income, which is used to compute their income tax due, after claiming and subtracting any tax exemptions and deductions for which they qualify.
Illustration:
For instance, you can claim a deduction of Rs 2.10 lakh under sections 80C, 80TTA, and 80CCD (1b) if your gross total income from all sources is Rs 12 lakh. You must compute taxes on a taxable income of Rs 9.9 lakh (Rs 12 lakh minus Rs 2.10 lakh). Under the previous tax system, your income tax slab would have been between Rs 5 lakh and Rs 10 lakh. 20% is the tax rate. However, the July 2024 budget included revisions to the income tax slabs and income tax regulations under the new tax regime. In addition to the Section 80CCD (2) deduction of up to 14% on the base pay for the employer's contribution to the employee's Tier-I NPS account, the new tax system permits a standard deduction of Rs 75,000 from salary and pension income as of April 1, 2024. According to the aforementioned example, the taxable income after deducting the deduction is, for example, Rs 9.9 lakh (Gross taxable income of Rs 12 lakh less Rs 2.10 lakh). The revised income tax slabs of Rs 7,00,001 and Rs 10,00,000 apply to the net taxable income of Rs 9.9 lakh. 10% tax will be applied on this.
Conclusion
In order to lower their tax liabilities, taxpayers used to often invest in and spend money on certain financial instruments. However, there aren't many exemptions or deductions available under the current income tax system. It's important to remember that under the former income tax system, there were seventy deductions or exclusions that could be used to reduce one's taxable income and overall income tax obligation. For those who are eligible for several tax deductions and exemptions, choosing the previous tax system may therefore prove to be more advantageous. The new tax structure, however, provides greater tax refund limitations and basic exemptions. Therefore, the new system will benefit those in lower income brackets.
FAQ
Q1. Who makes changes to the income tax slabs in India?
The Indian Finance Ministry is proposing modifications to the country's income tax slabs.
Q2. When are the changes to the income tax slabs in India proposed?
The Indian finance minister announces revisions to the country's income tax slabs. This suggestion is often made in February, when the annual budget is presented.
Q3. Is income up to 12 lakhs tax-free for FY 2025-26?
Yes, you would have no tax obligations if your income in FY 2025–2026 is up to Rs. 12,00,000. The income is taxed at the NIL rate for amounts up to Rs. 4,00,000. However, a Rs. 60,000 refund is permitted for income up to Rs. 12,00,000, which results in a NIL tax obligation for income up to Rs. 12,00,000.
Q4. Who should prefer the new tax regime?
The new system will help you if you make Rs. 20 lakh and your tax deductions are less than Rs. 3.75 lakh. If not, go with the earlier tax structure.
Q5. What is the disadvantage of the new tax regime?
Under the new tax structure, fewer exemptions and deductions are available. There are only a few options, including tax-free Provident Fund withdrawals, leave travel reimbursement, and the standard deduction.
Q6. Who can claim a rebate under Section 87A?
According to the new regime, any resident Indian who earns up to Rs. 7 lakh annually is eligible to claim a rebate under Section 87A.
Q7. Will there be any standard deductions for the financial year 2024-2025?
Yes, the standard deduction under the new regime would be Rs. 75,000 for the fiscal year 2024–2025.
Q8. What is the maximum deduction available under Section 80C for the FY 2025-26?
For FY 2025–2026, the maximum deduction allowed under Section 80C is still Rs. 1.5 lakh. By investing in qualified products like the Employees' Provident Fund (EPF), Public Provident Fund (PPF), and Equity-Linked Savings Scheme (ELSS), among others, taxpayers can take advantage of this deduction.
Q9. Is it mandatory to opt for the new tax regime for the FY 2025-26?
No, choosing the new tax regime for FY 2025–2026 is not required. The old and new tax regimes are both options available to taxpayers. At the beginning of the fiscal year, the decision to change regimes or not is final for the duration of the year. Income sources, deductions, and exemptions should all be carefully considered before choosing the optimum tax system for one's circumstances.
Q10. How do the new tax slabs for FY 2025-26 compare with the old regime?
The new regime offers lower tax rates but removes most deductions and exemptions. The old regime has higher rates but allows benefits like Section 80C, HRA, and more. Choosing depends on your eligible deductions.
Q11. Which tax regime is better for someone claiming deductions under Section 80C and 80D?
If you're availing deductions like 80C (up to ₹1.5 lakh), 80D (medical insurance), and HRA, the old regime might give you better tax savings compared to the new regime.
Q12. Are the income tax slabs different for senior and super senior citizens in AY 2026-27?
Yes, under the old regime, senior citizens (60–79 years) and super senior citizens (80+) have higher basic exemption limits. The new regime offers the same slab for all age groups.
Q13. Can salaried individuals switch between old and new regimes every year?
Yes, salaried individuals can switch between regimes each financial year by selecting the preferred one while filing their ITR. However, those with business income have more restrictions.
Q14. Is HRA exemption allowed under the new tax regime for FY 2025-26?
No, House Rent Allowance (HRA) is not allowed as a deduction in the new regime. You can claim it only under the old regime if you meet the conditions.
Q15. How does standard deduction apply under both tax regimes?
Standard deduction of ₹50,000 is available under both regimes now. This was recently extended to the new regime to make it more appealing for salaried taxpayers.
Q16. Are deductions under Section 24(b) on home loan interest allowed in the new regime?
No, the deduction of up to ₹2 lakh for home loan interest under Section 24(b) is not available in the new regime. You can claim it only under the old regime.
Q17. How does the income tax slab impact monthly TDS for salaried employees?
Your employer calculates monthly TDS based on your chosen regime and applicable slab rates. Choosing the regime wisely can help avoid excess TDS and improve cash flow.
Q18. Can I claim ELSS investments under the new tax regime?
No, ELSS mutual fund deductions under Section 80C are not available in the new tax regime. If you want to claim it, you must opt for the old regime.
Q19. Which ITR form should be filed if I choose the new tax regime?
For salaried individuals under the new regime without capital gains, ITR-1 may be used. However, your income type and complexity ultimately determine the correct ITR form.
Q20. How will income from freelancing or gig work be taxed under FY 2025-26 slabs?
Freelancers and gig workers must declare business income and can opt for presumptive taxation under Section 44ADA. Slab rates under either regime will apply accordingly.
Q21. Do different slabs apply to Hindu Undivided Families (HUFs) or just individuals?
The slab rates under both regimes apply similarly to individuals and HUFs. HUFs can also claim deductions under the old regime if eligible.
Q22. Are there any rebates or reliefs available under Section 87A in FY 2025-26?
Yes, under both regimes, if your total taxable income is up to ₹7 lakh, you can get a full rebate under Section 87A, resulting in zero tax liability.
Q23. How does the choice of tax regime affect advance tax liability?
Your regime choice affects your total tax outflow, which directly impacts your advance tax installments. Estimating tax correctly helps avoid interest under Sections 234B and 234C.
Q24. What should be considered while choosing the right regime for tax planning?
Evaluate your total deductions, exemptions, investments, and financial goals. Use online tax calculators to compare liabilities under both regimes before deciding.
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