The Union Budget 2025 brought major updates to income tax slabs under the new tax regime, effective from April 1, 2025 for FY 2025-26. The revised slabs widen the exemption range and change rates across brackets, making the new tax regime more appealing for many taxpayers.
At the same time, the old tax regime remains available with its existing slab structure and age-based exemption limits, along with traditional deductions.
New Tax Regime — Income Tax Slabs for FY 2025-26 (AY 2026-27)
Under the new tax regime for FY 2025-26, income tax is levied progressively with expanded slab limits. These rates apply from April 1, 2025.
Income Tax Rates — New Tax Regime FY 2025-26
These new slab rates allow taxpayers to save up to about ₹1.14 lakh in tax compared with earlier structures at certain income levels.
Tax Rebate and Exemption in New Regime
Under Section 87A, the tax rebate limit is proposed up to ₹60,000 for FY 2025-26, meaning zero tax for net taxable income up to ₹12 lakh under the new regime — a steep increase from the earlier limit.
The basic exemption limit is also increased to ₹4 lakh from ₹3 lakh previously.
Standard Deduction and Contributions
Under the new regime:
- Standard deduction of ₹75,000 from salary/pension continues.
- Employer’s contribution to NPS Tier-I accounts is allowed up to 14% of basic salary.
No other major deductions under Sections 80C, 80D, 80TTA etc., are available under the new tax regime.
New Tax Regime — Income Tax Slabs for FY 2024-25 (AY 2025-26)
The current filing year for FY 2024-25 follows slightly different slabs under the new tax regime:
Income Tax Rates — New Tax Regime FY 2024-25
Changes Introduced in Budget 2024–25
Before FY 2025-26 slabs, several changes in Budget 2024 altered the new tax regime, including:
- Increase in standard deduction to ₹75,000 from ₹50,000
- Family pension standard deduction to ₹25,000 from ₹15,000
- Higher employer contribution deduction for NPS to 14% from 10%
These changes were introduced to enhance tax savings for salaried and pension income earners.
Features of the New Tax Regime
- The new tax regime is now default for taxpayers unless they opt for the old regime.
- The basic exemption limit rises from ₹3 lakh to ₹4 lakh from FY 2025-26.
- Zero tax up to ₹12 lakh taxable income under Section 87A rebate.
- No change in surcharge rates under the new regime.
Old Tax Regime — Income Tax Slabs (No Change)
The old tax regime’s slabs remain unchanged for FY 2025-26.
Individuals Below 60 Years
Senior Citizens (60–80 Years)
Super Senior Citizens (80+ Years)
Under the old regime, taxpayers can still claim deductions under Section 80C, 80D, 80TTA, HRA, and others to reduce taxable income.
Side-by-Side Comparison of Slabs — Old vs New (FY 2024-25)
This comparison helps decide which regime may be suitable based on income and deductions claimed.
How to Calculate Tax — New Tax Regime (Example)
To calculate your tax under the new system:
- Subtract standard deduction and allowed NPS contribution.
- Apply the slab rates to net taxable income.
- Add surcharge and 4% health & education cess if applicable.
Example for an individual with taxable income of around ₹17 lakh under the new slab structure will be higher under older slabs but reduced with wider brackets.
How to Calculate Tax — Old Tax Regime (Example)
Under the old regime, taxpayers can reduce gross income with:
- 80C investments (up to a set limit)
- Medical insurance deduction
- Interest on savings account
After calculating net taxable income, slab rates are applied.
Old regime tax examples also include calculation of cess and surcharge based on age and income thresholds.
How to Choose Your Tax Regime
Taxpayers without business income can opt between old and new regimes every year based on which gives lower tax liability. Those with business income have limitations on switching.
Surcharge on Income Tax
Surcharge is applied in both regimes when total income exceeds specified thresholds:
Cess at 4% applies to the total tax plus surcharge in both regimes.
Summary
The revised income tax slabs for FY 2025-26 simplify tax rates, expand exemption limits, and enhance the rebate threshold. With the new regime as default, understanding these slabs and comparing old and new structures is crucial to optimise your tax planning.