New Income Tax Slabs for FY 2025-26 (AY 2026-27)

New Tax Regime Income Tax Slab Rates for FY 2025-26

The revised tax slabs under the new regime that are applicable from 1st April 2025 are as follows:

The Rebate has been increased to Rs. 60,000 from Rs. 25,000 for the FY 2025-26. With the revised tax structure, individuals earning up to Rs.12 lakhs will have no tax liability due to the increased rebate of Rs.60,000. For salaried individuals, the tax liability will be zero for incomes up to Rs.12.75 lakhs due to the Rs.75,000 standard deduction.

Note:

• The marginal relief on the rebate is still applicable.
• The rebate is not available for income that is taxed at special rates (e.g., capital gains under section 112A).

New Tax Regime Income Tax Slab Rates for FY 2024-25

• Tax rates are the same for all categories of Individuals, i.e. Individuals, Senior citizens, and Super senior citizens.
• Rebate: Tax rebate up to Rs.25,000 is applicable if the total income does not exceed Rs. 7,00,000 (not applicable for NRIs).
• Standard Deduction: Allowed for salaried employees is Rs.75,000.
• Deduction under Family Pension: Increased from Rs.15,000 to Rs.25,000.
• NPS Contribution: The deduction limit on employer’s contribution to NPS is 14% for FY 2024-25.
• Surcharge: The highest surcharge rate is 25% as opposed to 37% in the old.
• The new regime is the default tax regime.

Old Tax Regime Income Tax Slab Rates for FY 2024-25

There were no changes made to the tax slabs under the old regime. The tax slabs under the old regime are as follows:

• Individuals less than 60 Years of Age

• Resident Individuals Aged 60-80 Years

• Resident Individuals Aged more than 80 Years

Note: 

• Surcharge and cess will be applicable.
• Individual residents with net taxable income less than or equal to Rs.5 lakh will be eligible for tax rebate u/s 87A under the old tax regime, i.e. tax liability will be NIL.

How to Calculate Income Tax?

The tax liability on your taxable income is for FY 2024- 25 is calculated as follows:

Under the New Regime

Under the Old Regime

• Individuals less than 60 Years of Age

• Resident Individuals Aged 60-80 Years

• Resident Individuals Aged more than 80 Years

Note:

• Surcharge and cess will be applicable.
• Individuals with net taxable income less than or equal to Rs.5 lakh will be eligible for tax rebate u/s 87A under the old tax regime, i.e. tax liability will be NIL.

What is Rebate u/s 87A?

• Rebate provides tax relief for resident individuals who earn a lower income, even if their taxable income crosses the basic exemption limit.
• Non-residents, companies, HUF, and other assessees are not eligible for rebates.
• Rebate for FY 2024 – 25 is as follows:
  • Under the new tax regime, individuals with taxable income up to ₹7 lakhs are eligible for a rebate of ₹25,000.
  • Under the old tax regime, individuals with taxable income up to ₹5 lakhs are eligible for a rebate of ₹12,500.
• For FY 2025-26, the rebate under the new regime is Rs. 60,000. There is no rebate change under the old regime.

What is Marginal Relief on Rebate?

• Marginal relief on rebate is available under the new regime.
• Even if income slightly exceeds the rebate threshold limit, we can use marginal relief to reduce taxes.
• If your income just crosses the rebate limit and the tax you have to pay is more than the extra income you earned, you only need to pay tax equal to that additional income – not more than that. This is the concept of marginal relief.

What is Surcharge?

If income exceeds a certain threshold, additional taxes must be paid over and above existing tax rates. This is an additional tax on High-Income Earners.

Surcharge rates are as below:

 *The highest surcharge rate of 37% has been reduced to 25% under the new tax regime. (applicable from 1st April 2023)

• Surcharge rates of 25% or 37% will not apply to the income from dividends and capital gains taxable under sections 111A (Short Term Capital Gain on Shares), 112A (Long Term Capital Gain on Shares), and 115AD (Tax on the income of Foreign Institutional Investors). Therefore, the highest surcharge rate on the tax payable for such incomes will be 15%.
• The surcharge rate for an Association of Persons (AOP) consisting entirely of companies will also be limited to 15%.
• Additional Health and Education cess at the rate of 4% will be added to the income tax liability.

Comparative Analysis of Income Tax Slabs Under Old vs. New Regime

Let us understand income tax slab rates under the old and new regimes using the following illustrations. The following examples also explain the tax slab rates of FY 2025-26 along with FY 2024-25:

Case-1: When the Income is Rs. 21 lakhs

• Taxable Salary Income: Rs. 20 lakhs
• Other Income: Rs. 1 lakh

Tax Calculation Under Both the Regime for FY 2024-25

Since the standard deduction differs, the taxable income is Rs. 25,000 less under the new regime. We will now understand how to calculate income tax using slab rates. To calculate slab rates, imagine a staircase, where each step denotes the level of income.

Tax calculation under the new regime for FY 2024-25

• The taxable income under the new regime is Rs 20.25 lakhs.
• For the first slab, Rs 3 lakhs of the income, the tax is nil.
• The second slab is income between Rs. 3 lakhs and Rs. 7 lakhs – the next 4 lakhs of income. Tax rate for this slab is 5%, and the  income tax on the second slab is Rs 20,000
• The third slab is income between Rs. 7 lakhs and Rs. 10 lakhs – the next 3 lakhs. The tax rate for this slab is 10%, and the income tax on the third slab is Rs. 30,000.
• The fourth slab is income between Rs. 10 lakhs and Rs. 12 lakhs – the next 2 lakhs. The tax rate for this slab is 15%, and the income tax on the fourth slab is Rs. 30,000.
• The fifth slab is income between Rs. 12 lakhs and Rs. 15 lakhs – the next 3 lakhs. The tax rate for this slab is 20%, and the income tax on the fifth slab is Rs. 60,000.
• The last slab is for income above Rs. 15 lakhs. The tax rate for this slab is 30%. The income in the last slab is Rs. 5,25,000 (Rs. 20,25,000—Rs. 15,00,000), and the income tax in the last slab is Rs. 1,57,500.
• Summing up the taxes calculated in all the slabs, the total comes to Rs. 2,97,500
• After all the taxes, a 4% health and education cess is added. In this case, the 4% cess amount comes to Rs. 11,900.
• Total income tax, including cess, is Rs. 3,09,400

Tax calculation under the old regime

• The taxable income under the old regime is Rs 20.5 lakhs.
• For the first slab, the income up to Rs 2.5 lakhs is tax-free. So, the income tax on the first slab is nil.
• The second slab covers income between Rs 2.5 lakhs and Rs 5 lakhs – the next Rs 2.5 lakhs. The tax rate for this slab is 5%, and the income tax on the second slab is Rs 12,500.
• The third slab covers income between Rs 5 lakhs and Rs 10 lakhs – the next Rs 5 lakhs. The tax rate for this slab is 20%, and the income tax on the third slab is Rs 1,00,000.
• The fourth slab is for income above Rs 10 lakhs. In this case, the income in this slab is Rs 10.5 lakhs (Rs 20.5 lakhs minus Rs 10 lakhs). The tax rate for this slab is 30%, and the income tax in the fourth slab is Rs 3,15,000.
• Summing up the taxes calculated in all the slabs, the total comes to Rs 4,27,500.
• After all the taxes, a 4% health and education cess is added. In this case, the 4% cess amount comes to Rs 17,100.
• The total income tax, including cess, is Rs 4,44,600.

Since the tax payable under the new regime is less than that under the old regime, the new regime is beneficial in this case.

For FY 2025-26 (AY 2026-27)

For the same income under the new regime, the taxes, including cess, would be Rs. 2,14,500 for FY 2025-26, with further relaxed slab rates.

Case-2: When the Income is Rs 10 lakhs

• Salary Income: Rs 9 lakhs
• Other Income: Rs 1 lakh

Tax Calculation Under Both the Regime for FY 2024-25

In this case also, the new regime is more beneficial, owing to relaxed slab rates.

For FY 2025-26 (AY 2026-27)

Under the new regime, taxes would be nil for FY 2025-26 for the same income since income up to Rs.12 lakhs would be practically zero taxable, owing to increased rebates and further relaxed slab rates.

What are the Exemptions and Deductions Not Available Under the New Regime?

The following are some of the major deductions and exemptions that are not available under the new tax regime:

Salary

• Professional tax and entertainment allowance on salaries
• Leave Travel Allowance (LTA)
• House Rent Allowance (HRA)
• Allowances to MPs/MLAs
• Helper allowance
• Children education allowance
• Other special allowances [Section 10(14)]

House Property

• Interest on housing loan on the self-occupied property or vacant property (Section 24)

Other Sources

• Minor child income allowance

Business or Profession

• Additional depreciation under section 32(1)(iia)
• Deductions under section 32AD, 33AB, 33ABA
• Various deductions for donation for or expenditure on scientific research contained in section 35(2AA) or 35(1)(ii) or (iia) or (iii)
• Deduction under section 35AD or section 35CCC
• Exemption under section 10AA for SEZ units

Chapter VI-A Deductions

• The deduction under Section 80TTA/80TTB
• Section 80C, 80D, 80E and so on, except Section 80CCD(2) and Section 80JJAA
• Exemption or deduction for any other perquisites or allowances including food allowance of Rs.50/meal subject to 2 meals a day
• Employee’s (own) contribution to NPS
• Donation to Political party/trust, etc

What are the Exemptions and Deductions Available Under the New Regime?

The following are deductions and exemptions that are available under the new tax regime:

Salary

• Transport allowances in case of a specially-abled person.
• Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment.
• Any compensation received to meet the cost of travel on tour or transfer.
• Daily allowance received to meet the ordinary regular charges or expenditure you incur on account of absence from his regular place of duty.
• Perquisites for official purposes
• Exemption on voluntary retirement 10(10C), gratuity u/s 10(10) and Leave encashment u/s 10(10AA)
• Budget 2023 introduced a standard deduction of Rs.50,000 under New Tax Regime applicable from FY 2023-24. This has been increased to Rs.75,000 in Budget 2024 applicable from FY 2024-25

House Property

• Interest on Home Loan on let-out property (Section 24)

Other Sources

• Gifts up to Rs. 50,000
• Budget 2023 also introduced deduction under Section 57(iia) of family pension income. In Budget 2024 Limit of maximum Deduction under Family Pension has been increased from Rs.15,000 to Rs.25,000.

Chapter VI-A Deductions

• Deduction for employer’s contribution to NPS account [Section 80CCD(2)]
• Deduction for additional employee cost (Section 80JJA)
• Budget 2023 further introduced deduction of amount paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2)
• The deduction on employers contribution to pension Scheme as per Section 80CCD (2) has been increased from 10% of salary to the 14% of salary in Budget 2024.

Old Tax Regime Vs New Tax Regime – Analysis of Deductions

A comparative analysis of deductions available in new regime and old regime is given below:

Old Tax Regime Vs New Tax Regime – Which is Better?

The new tax regime can largely benefit middle-class taxpayers who have a taxable income of up to Rs.15 lakh. The old regime is a better option for high-income earners.

For super-senior citizens, since there is a relaxed Basic Exemption Limit of Rs.5,00,000, old regime is beneficial for them, in case they are middle class earners.

The new income tax regime is beneficial for people who make low investments. As the new regime offers six lower-income tax slabs, anyone paying taxes without claiming tax deductions can benefit from paying a lower rate of tax under the new tax regime. For instance, the assessee having total income before deduction up to Rs.12 lakh will have higher tax liability under the old system if they have investments less than Rs.3,12,500. Therefore, if you invest less in tax-saving schemes, go for the new regime.

That being said, if you already have in place a financial plan for wealth creation by making investments in tax-saving instruments; medical claims and life insurance; making payments of children’s tuition fees; payment of EMIs on education loan; buying a house with a home loan; and so on, the old regime helps you with higher tax deductions and lower tax outgo.

In light of the above and considering the new income tax regime, if taxpayers want to opt for the concessional tax rates, they may evaluate both regimes. Hence, it is advisable to do a comparative evaluation and analysis under both regimes and then choose the most beneficial one, as it may vary from person to person.

When Can I Opt for Old vs New Regime?

Income Tax Rate for Partnership Firm or LLP as per Old/New Regime

A partnership firm/ LLP is taxable at 30%.
NOTE:

• 12% Surcharge is levied on income is more than Rs.1 crore
• Health and Education Cess at the rate of 4% will be applicable
• No concessional rates are introduced for firms LLPs in the next tax regime

Income Tax Slab Rates for FY 2019-20, FY 2020-21, FY 2021-22 and FY 2022-23

Income Tax Slab for Individual Aged Below 60 Years & HUF

Income Tax Slab for Individual Aged Above 60 Years to 80 Years

Income Tax Slab for Individual Aged More Than 80 Years

Income Tax Slab FY 2019-20, FY 2020-21, FY 2021-22 and FY 2022-23 for Domestic Companies