Income Tax Slabs FY 2025-26: New vs Old Regime Complete Guide
Income Tax Slabs FY 2025-26 have changed significantly after Budget 2025, especially under the New Tax Regime. Salaried individuals can now enjoy zero tax liability up to ₹12.75 lakh income due to the enhanced Section 87A rebate and higher standard deduction.
Choosing between the Old Tax Regime and the New Tax Regime is now one of the most important tax planning decisions for taxpayers, salaried employees, freelancers, professionals, and business owners.
In this complete guide, we explain:
- Latest income tax slab rates FY 2025-26
- New vs Old Tax Regime comparison
- Section 87A rebate rules
- Standard deduction benefits
- Real tax calculation examples
- Which regime is better for you
Table of Contents
- Income Tax Slabs FY 2025-26
- New Tax Regime Slab Rates
- Old Tax Regime Slab Rates
- Section 87A Rebate Explained
- Standard Deduction Changes
- Deductions Allowed vs Not Allowed
- Real Tax Calculation Examples
- Which Tax Regime is Better?
- FAQs
- Conclusion
Income Tax Slabs FY 2025-26
The Government has continued the New Tax Regime as the default tax system under Section 115BAC. However, taxpayers can still choose the Old Tax Regime while filing their Income Tax Return (ITR).
The biggest highlight of the revised structure is:
✅ Zero tax up to ₹12 lakh taxable income
✅ Zero tax up to ₹12.75 lakh salary income for salaried employees
✅ Higher standard deduction of ₹75,000
✅ Lower tax burden for middle-class taxpayers
New Tax Regime Slabs FY 2025-26
| Income Range | Tax Rate |
| Up to ₹4,00,000 | NIL |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
The 30% slab now starts only after ₹24 lakh income, providing substantial tax savings for salaried individuals and professionals.
Old Tax Regime Slabs FY 2025-26
| Income Range | Tax Rate |
| Up to ₹2,50,000 | NIL |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Senior Citizen Benefits under Old Regime
- Senior Citizens (60–80 years): Basic exemption up to ₹3 lakh
- Super Senior Citizens (80+ years): Basic exemption up to ₹5 lakh
Under the New Tax Regime, the exemption limit is uniform for all taxpayers.
Section 87A Rebate Under New Tax Regime
One of the biggest reasons why the Income Tax Slabs FY 2025-26 are attracting massive attention is the enhanced Section 87A rebate.
Key Highlights
- Zero tax up to ₹12 lakh taxable income
- Maximum rebate increased to ₹60,000
- Salaried employees get effective zero tax up to ₹12.75 lakh income after ₹75,000 standard deduction
Example
If your taxable income is ₹12 lakh:
- Calculated tax = ₹60,000
- Section 87A rebate = ₹60,000
- Final tax payable = ₹0
What is Marginal Relief?
Marginal relief ensures that taxpayers crossing the ₹12 lakh limit by a small amount do not suddenly face a huge tax burden.
For example, if your taxable income exceeds ₹12 lakh slightly, your additional tax liability will not exceed the amount by which your income exceeds ₹12 lakh.
This provision protects taxpayers from sudden tax spikes.
Standard Deduction FY 2025-26
| Tax Regime | Standard Deduction |
| Old Tax Regime | ₹50,000 |
| New Tax Regime | ₹75,000 |
The higher deduction under the New Regime further increases tax savings for salaried employees and pensioners.
Deductions Allowed Under Old vs New Tax Regime
| Deduction | Old Regime | New Regime |
| Standard Deduction | Yes | Yes |
| Section 80C | Yes | No |
| Section 80D | Yes | No |
| HRA Exemption | Yes | No |
| Home Loan Interest | Yes | No |
| LTA | Yes | No |
| Employer NPS Contribution | Yes | Yes |
Taxpayers with high deductions may still benefit from the Old Tax Regime.
Income Tax Calculation Example – ₹10 Lakh Salary
Old Tax Regime
Assuming deductions:
- Standard Deduction = ₹50,000
- Section 80C = ₹1,50,000
- Section 80D = ₹25,000
Total deductions = ₹2,25,000
Taxable income = ₹7,75,000
Total tax with cess = ₹70,200
New Tax Regime
- Standard deduction = ₹75,000
- Taxable income = ₹9,25,000
- Eligible for Section 87A rebate
Final tax payable = ₹0
✅ New Regime saves ₹70,200
Income Tax Calculation Example – ₹15 Lakh Salary
Old Tax Regime
Assuming total deductions = ₹2,50,000
Taxable income = ₹12,50,000
Total tax with cess = ₹1,95,000
New Tax Regime
Taxable income = ₹14,25,000
Total tax with cess = ₹97,500
✅ New Regime saves ₹97,500
Which Tax Regime is Better in FY 2025-26?
Choose New Tax Regime If:
- Your salary is up to ₹12.75 lakh
- You do not claim large deductions
- You prefer simple tax filing
- You are a freelancer or consultant
- You want higher monthly cash flow
Choose Old Tax Regime If:
- You claim large deductions under Section 80C and 80D
- You pay home loan interest
- You receive high HRA exemption
- Your total deductions exceed ₹4 lakh
Surcharge Rates for High-Income Taxpayers
| Income Level | Old Regime | New Regime |
| ₹50 lakh – ₹1 crore | 10% | 10% |
| ₹1 crore – ₹2 crore | 15% | 15% |
| ₹2 crore – ₹5 crore | 25% | 25% |
| Above ₹5 crore | 37% | 25% |
The reduced surcharge under the New Regime benefits High Net-Worth Individuals (HNIs).
For professional Income Tax Return filing assistance, taxpayers can also visit https://mytaxguide.in/ for expert support related to salaried income, business income, GST, TDS, and compliance services.
For official updates regarding Income Tax Slabs FY 2025-26, taxpayers can visit the official Income Tax Department portal: https://www.incometax.gov.in
Detailed Budget 2025 taxation announcements and financial proposals are available on the official Union Budget website: https://www.indiabudget.gov.in/
Taxpayers can also refer to the Ministry of Finance website for recent policy changes and financial announcements: https://www.finmin.nic.in/
Frequently Asked Questions (FAQs)
1. Is income up to ₹12 lakh tax-free?
Yes. Under the New Tax Regime, taxable income up to ₹12 lakh becomes tax-free due to the enhanced Section 87A rebate.
2. Is salary up to ₹12.75 lakh tax-free?
Yes. Salaried individuals benefit from the ₹75,000 standard deduction, making income up to ₹12.75 lakh effectively tax-free.
3. Can I claim Section 80C under the New Tax Regime?
No. Most deductions including Section 80C, 80D, and HRA are not available under the New Tax Regime.
4. Can I switch between Old and New Regime?
Yes. Salaried taxpayers can choose between the two regimes while filing their Income Tax Return.
5. Which regime is better for salaried employees?
For most salaried employees without major deductions, the New Tax Regime is usually more beneficial.
Conclusion
The revised Income Tax Slabs FY 2025-26 have made the New Tax Regime extremely attractive for middle-class taxpayers and salaried individuals.
With:
- Zero tax up to ₹12.75 lakh salary
- Higher standard deduction
- Lower slab rates
- Simplified tax structure
…the New Tax Regime is expected to become the preferred option for most taxpayers.
However, taxpayers with heavy investments, home loans, HRA benefits, and large deductions should still compare both regimes carefully before filing their Income Tax Return.