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 2026 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:

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.

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.

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.

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

• For individuals between 60 and 80 years old

• For senior citizens

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:

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.