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Income Tax Slab for FY 2025-26

By Tata Capital
23 June 2025
5 mins read
2839

The finance minister announces a new tax regime yearly, and citizens await the changes. These alternates 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? 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 of India.

New Tax Slab for Financial Year 2025-26

The restructured tax slab is as follows:

Income Bracket	Tax Percentage
Up to NR 4 Lakh	0%
INR 4 Lakh to 8 Lakh	5%
INR 8 Lakh to 12 Lakh	10%
INR 12 Lakh to 16 Lakh	15%
INR 16 Lakh to 20 Lakh	20%
INR 20 Lakh to 24 Lakh	25%
Above INR 24 Lakh	30%

The new tax regime opens up the opportunity for up to INR 1.14 Lakh per annum, reducing the burden on individuals. Additionally, the rebate for taxpayers has increased to INR 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 INR 12,00,000.

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

What Does the New Tax Regime Include?

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 INR 25,000 is applicable if the total income is up to INR 7 Lakh.
A standard deduction of INR 75,000 is allowed for employees.
The family pension deduction has reached INR 25,000.
The NPS deduction has moved up from 10% to 14%.
The surcharge rate has dropped from 37% to 25%.

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 default tax regime.

Income Slab	Tax Rate and Calculation
Up to INR 3 lakh	Nil
INR 3 lakh – INR 7 lakh	5% on income above INR 3 lakh
INR 7 lakh – INR 10 lakh	INR 20,000 + 10% on income above INR 7 lakh
INR 10 lakh – INR 12 lakh	INR 50,000 + 15% on income above INR 10 lakh
INR 12 lakh – INR 15 lakh	INR 80,000 + 20% on income above INR 12 lakh
Above INR 15 lakh	INR 1,40,000 + 30% on income above INR 15 lakh

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

Income Slab	Tax Rate and Calculation
Up to INR 2.5 lakh	Nil
INR 2.5 lakh – INR 5 lakh	5% on income
INR 5 lakh – INR 10 lakh	INR 12,500 + 20% on income
INR 10 lakh and above	INR 1,12,500 + 30% on income

For individuals between 60 and 80 years old

Income Slab	Tax Rate and Calculation
Up to INR 3 lakh	Nil
INR 3 lakh – INR 5 lakh	5% on income
INR 5 lakh – INR 10 lakh	INR 10,000 + 20% on income
INR 10 lakh and above	INR 1,10,000 + 30% on income

For senior citizens

Income Slab	Tax Rate and Calculation
Up to INR 5 lakh	Nil
INR 5 lakh – INR 10 lakh	20% of income
INR 10 lakh and above	INR 1,00,000 + 30% on income

Modifications in Income Tax Structure 2025

A few changes are applicable, effective from 1st April. According to the 2025 Union Budget, there 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:

Amendment	Meaning
Section 87A Rebate	The rebate has increased to INR 60,000 under Section 87A. This means anyone earning up to INR 12 Lakh doesn’t have to pay tax.
TDS Threshold	There is a revision of the TDS limit:Interest on senior citizen deposits – INR 1 LakhRent Payment – INR 6 Lakh
TCS Changes	There 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 Extension	Taxpayers 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 Benefits	New 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 Companies	Any company incorporated between April 203 and March 2025 will get a 100% tax exemption on 3 years of profit.
Section 206AB and 206CCA Removed	Earlier, 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 Equalisation Levy
Ease of Rented Property Provision

Conclusion

The new tax regime offers multiple benefits to the taxpayers. However, some individuals might find the old regime to be financially favourable 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.