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Income tax slab for FY 2025-26

Income tax slab for FY 2025-26

The finance minister announces a new tax regime yearly, and citizens await the changes. These alternatives aim to simplify the tax system and provide better financial freedom to the taxpayers, falling under various income brackets. Nirmala Sitharaman introduced new income tax slabs for FY 2025-26. It relieved salaried employees and businesspeople. However, what is the exact difference between the old and new tax regime slabs? Should you choose the new regime or pay according to the old one?

This blog discusses the changes in the income tax structure for 2025 and how it benefits different sectors and individuals in India.

New tax regime slabs for FY 2025-26

The restructured tax slab is as follows:

Income BracketTax Percentage
Up to Rs. 4 lakh0%
Rs. 4 lakh to 8 lakh5%
Rs. 8 lakh to 12 lakh10%
Rs. 12 lakh to 16 lakh15%
Rs. 16 lakh to 20 lakh20%
Rs. 20 lakh to 24 lakh25%
Above Rs. 24 lakh30%

The new tax regime opens up the opportunity for savings of up to Rs. 1.14 lakh per annum, reducing the burden on individuals. Additionally, the rebate for taxpayers has increased to Rs. 60,000. The revised structure assures that the individuals do not have to pay tax. This is valid for anyone with an income of up to Rs. 12,00,000.

Due to the standard deduction of up to Rs. 75,000, the tax liability for salaried employees earning up to Rs. 12.75 Lakh becomes zero.

What is covered in the new tax regime for FY 2025-26?

The new tax regime has brought about the following changes:

  • The same tax rate is applicable to every individual. This includes salaried, senior, and super senior citizens.
  • A tax rebate of up to Rs. 25,000 is applicable if the total income is up to Rs. 7 lakh.
  • A standard deduction of Rs. 75,000 is allowed for employees.
  • The family pension deduction has reached Rs. 25,000.
  • The NPS deduction has moved up from 10% to 14%.
  • The surcharge rate has dropped from 37% to 25%.

Old tax regime slabs for FY 2025-26 (with senior/super senior citizen specifics)

Under the old tax regime, the income tax slabs for FY 2025-26 in India are unchanged. Here’s a table comparing the tax slabs in India for individuals below 60 years of age, senior citizens, and super senior citizens.

Income tax slabIncome tax rate (individuals below 60 years)Income tax rate (Senior citizens: 60 to 79 years)Income tax rate (Super senior citizens: 80+ years)
Up to Rs. 2.5 lakhNilNilNil
Rs. 2.5 lakh to 3 lakh5%NilNil
Rs. 3 lakh to 5 lakh5%5%Nil
Rs. 5 lakh to 10 lakh20%20%20%
Above Rs. 10 lakh30%30%30%

The old tax regime allows taxpayers to claim deductions such as House Rent Allowance (HRA), Leave Travel Allowance (LTA), and home loan interest. These deductions help to reduce taxable income. The basic exemption limits for senior and super senior citizens are higher. This results in additional tax relief.

Income tax slab comparison: FY 2025-26 old vs new

The following table compares the income tax slabs under the old and new tax regimes for FY 2025-26. Understanding the differences will help you determine which regime suits you the best.

ParameterOld tax regimeNew tax regime
Basic exemption limitRs. 2.5 lakh (Rs. 3 lakh for seniors and Rs. 5 lakh for super seniors)Rs. 4 lakh for all taxpayers
Tax slab rates5%, 20%, 30%5% to 30%
Standard deductionRs. 75,000Rs. 75,000
Deductions & exemptionsSection 80C, 80D, HRA, LTA, etc.Mostly not allowed
Section 87A rebateUp to Rs. 25,000 for income up to Rs. 7 lakhUp to Rs. 60,000 for income up to Rs. 12 lakh
Age-based slab benefitAvailableNot available
Suitable forTaxpayers with higher deductionsTaxpayers with fewer deductions

How to calculate your income tax under the new tax regime?

As a taxpayer, it is important to know how to calculate your income under the new tax regime.

Income slabTax rate and calculation
Up to Rs. 4 lakhNil
Rs. 4 lakh to Rs. 8 lakh5%
Rs. 8 lakh to Rs. 12 lakh10%
Rs. 12 lakh to Rs. 16 lakh15%
Rs. 16 lakh to Rs. 20 lakh20%
Rs. 20 lakh to Rs. 24 lakh25%
Above Rs. 24 lakh30%

How to calculate your income tax under the old tax regime?

If you want to choose the old tax regime, here is how you can calculate it:

  • For individuals less than 60 years old
Income SlabTax Rate and Calculation
Up to Rs. 2.5 lakhNil
Rs. 2.5 lakh – Rs. 5 lakh5% on income
Rs. 5 lakh – Rs. 10 lakhINR 12,500 + 20% on income
Rs. 10 lakh and aboveINR 1,12,500 + 30% on income
  • For individuals between 60 and 80 years old
Income SlabTax Rate and Calculation
Up to Rs. 3 lakhNil
Rs. 3 lakh – Rs. 5 lakh5% on income
Rs. 5 lakh – Rs. 10 lakhINR 10,000 + 20% on income
Rs. 10 lakh and aboveINR 1,10,000 + 30% on income
  • For senior citizens
Income SlabTax Rate and Calculation
Up to Rs. 5 lakhNil
Rs. 5 lakh – Rs. 10 lakh20% of income
Rs. 10 lakh and aboveINR 1,00,000 + 30% on income

Deductions & exemptions allowed: Old vs new regime FY 2025-26

It is vital to learn about the deductions and exemptions allowed under different tax regimes before filing returns.

The old regime allows several deductions and exemptions that help reduce taxable income. These include Section 80C (PPF, ELSS, LIC, EPF), Section 80D (health insurance), HRA, LTA, home loan interest, education loan interest, and donations under Section 80G. Salaried employees and pensioners also get a standard deduction of Rs. 75,000.

The new regime offers lower tax rates, but deductions are limited. Most exemptions, like HRA, LTA, and 80C, are not allowed. However, you do get a standard deduction of Rs. 75,000 apart from a rebate of Rs. 60,000 under Section 87A.

Which income tax regime should you choose for FY 2025-26?

The income tax regime you should choose for FY 2025-26 depends on your income bracket and deductions. If you can benefit from deductions like HRA, Section 80C investments, health insurance premiums (Section 80D), LTA, or home loan interest, opting for the old tax regime is better.

On the other hand, the new tax regime is simpler and works well for people with fewer or no deductions. It offers a higher basic exemption of Rs. 4 lakh. It also offers a rebate of Rs. 60,000 for income up to Rs. 12 lakh, and a Rs. 75,000 standard deduction. This can result in zero tax liability for many middle-income earners.

You should calculate and compare your tax liability under both regimes before making a choice. Salaried employees can switch regimes every year. Thus, you should choose the one that gives you lower tax liability and easier compliance.

Key changes in FY 2025-26 tax rules

A few changes are applicable, effective from 1st April. According to the 2025 Union Budget, these are amendments for the betterment of the taxpayers. These changes are adopted to simplify compliance and increase transparency.

This table provides you with a glimpse into the changes:

AmendmentMeaning
Section 87A RebateThe rebate has increased to Rs. 60,000 under Section 87A. This means anyone earning up to Rs. 12 lakh doesn’t have to pay tax.
TDS ThresholdThere is a revision of the TDS limit: Interest on senior citizen deposits – Rs. 1 lakh Rent Payment – Rs. 6 lakh
TCS ChangesThere will be no Tax Collected at Source for overseas tour packages and foreign remittances. New TCS rates are introduced for certain high-value transactions.
Time Limit ExtensionTaxpayers have a longer time to file their taxes. The limit has been moved to four years so that individuals have sufficient time to rectify any issues.
IFSC BenefitsNew tax incentives have been introduced to promote the International Financial Services Centre in Gujarat. You will get a capital gain tax exemption on specific transactions. There will be a concession on the tax rate of specific financial services.
Tax Exemption for Startup CompaniesAny company incorporated between April 2023 and March 2025 will get a 100% tax exemption on 3 years of profit.
Section 206AB and 206CCA RemovedEarlier, individuals who failed to file taxes on time faced increased TCS and TDS rates. Now, this penalty has been removed to ease the taxpayers’ burden.

Apart from the above-discussed changes, the new tax regime also provides:

  • Deduction to partner’s remuneration
  • ULIPs as capital gains
  • Elimination of the equalization levy
  • Ease of rented property provision

Conclusion

The new tax regime offers multiple benefits to taxpayers. However, some individuals might find the old regime to be financially favorable for them. Understanding the difference between the regimes helps ascertain your future investment decisions, such as a house loan. Consult Tata Capital experts if you want to learn about how the new tax regime affects your home loan interest and financial implications.

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FAQs

What are the previous year and assessment year?

The previous year is when you earn the income, and the assessment year is when you pay the tax.

Is 80C applicable in the new tax regime?

Section 80C is not applicable in the new tax regime.

How to calculate surcharge on income tax?

The surcharge on income tax depends on your income bracket. For example, income between INR 50 Lakh and 1 Crore is 10%.

What is the meaning of rebate under section 87A of the IT Act?

The rebate is applicable for taxpayers earning less than INR 7 lakh (new tax regime) and INR 5 lakh (old tax regime).

What are the new income tax slabs for FY 2025-26 in India?

Under the new tax regime slabs, there are no taxes on income up to Rs. 4 lakh. For incomes above Rs. 4 lakh, tax rates range from 5% to 30%. The highest rate is applicable above Rs. 24 lakh.

How is the tax calculated under the old and new regimes for FY 2025-26?

You can use the updated tax slabs to calculate taxes under the old and new regimes. The old regime allows multiple deductions before the calculation of taxes. The new regime applies lower slab rates. It has limited deductions but a higher rebate threshold.

Who should opt for the new tax regime vs the old tax regime?

You can use the updated tax slabs to calculate taxes under the old and new regimes. The old regime allows multiple deductions before the calculation of taxes. The new regime applies lower slab rates. It has limited deductions but a higher rebate threshold.

Is the standard deduction available in both tax regimes for FY 2025-26?

Yes, a standard deduction of Rs. 75,000 is available under both the old and new tax regimes. Salaried employees and pensioners can benefit from it.

What is the income tax rebate under Section 87A for FY 2025-26?

The income tax rebate under Section 87A for FY 2025-26 is Rs. 60,000 for individuals earning up to Rs. 12 lakh. This rebate effectively makes the tax liability zero.

Are there different tax slabs for senior citizens and super senior citizens?

Under the old tax regime, there are minor variations in tax slabs for senior citizens and super senior citizens. You can review the slabs in the table above. However, under the new tax regime, the tax slabs remain the same regardless of the taxpayer’s age.

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