A Complete Guide to Income Tax Slabs

Income tax in India is calculated based on slabs, which classify taxpayers into different income brackets, with each bracket taxed at a specific rate. These rates (referred to as income tax rates) determine how much tax you pay for that financial year. This blog compares the new and old income tax regimes, including their slab structures, benefits, and more.

Old Regime vs New Regime Income Tax Slab

India offers two tax regimes: the old and new tax regimes, each with different tax slabs and benefits. Below is a comparison of the tax slabs for both regimes for FY 2025-26:

Old Regime Income Tax Slab

Income Tax Slab	Tax Rate
Up to ₹2,50,000	Nil
From ₹2,50,001 to ₹5,00,000	5%
From ₹5,00,001 to ₹10,00,000	20%
Above ₹10,00,000	30%

New Regime Income Tax Slab

Income Tax Slab	Tax Rate
Up to ₹4,00,000	Nil
From ₹4,00,001 to ₹8,00,000	5%
From ₹8,00,001 to ₹12,00,000	10%
From ₹12,00,001 to ₹16,00,000	15%
From ₹16,00,001 to ₹20,00,000	20%
From ₹20,00,001 to ₹24,00,000	25%
Above ₹24,00,000	30%

Key Income Tax Changes After April 2025

Here are the key income‑tax changes effective from 1st April 2025:

1. New Income Tax Slab

New Tax Regime:

• The basic exemption limit has been increased to ₹4 lakh (up from ₹3 lakh).
• The income tax slabs have been expanded, meaning more people can pay lower taxes.

Old Tax Regime: The tax slabs stay the same as before.

2. Increased Rebate Under Section 87A

• New Tax Regime: The rebate has been increased to ₹60,000, which means a resident individual with a net income up to ₹12 lakh has zero tax liability.
• Old Tax Regime: The rebate stays at ₹12,500, meaning net income up to ₹5 lakh has zero tax liability.

3. Enhanced TDS Thresholds

The government has increased the limits for Tax Deducted at Source (TDS), so it will only be deducted if your earnings exceed certain amounts:

• Section 193: For interest on securities, TDS will apply only if the amount exceeds ₹10,000.
• Section 194: For dividends and individual shareholders, TDS will apply only if the amount exceeds ₹10,000 (up from ₹5,000).
• Section 194(A): TDS limit on interest income for senior citizens has been increased to ₹1,00,000 from the existing ₹50,000.

4. Changes to Tax Collected at Source (TCS)

• Section 206C(1G): TCS on foreign remittances under LRS will apply only if the amount exceeds ₹10 lakh.
• Section 206C(1G): No TCS applicable on education remittances under LRS when financed by Education Loans.
• Section 206C(1H): The provision is removed, and there’s no collection of TCS on the sale of goods.

5. Updated Tax Return: Extension of Time Limit

The deadline for filing an updated tax return is now extended to 4 years (previously, it was 2 year). This allows taxpayers more time to file if they miss the deadline.

Also Read: Everything You Need to Know About Income Tax Returns Filing

Different Income Tax Slab Rates

In the new tax regime, there are no separate income tax slabs or tax rates for different categories of individuals, such as senior citizens or super senior citizens. The tax rates are the same for all taxpayers, regardless of age. However, under the old tax regime, the tax slabs and rates are differentiated based on the taxpayer’s age.

Here’s a breakdown of the different tax slab rates under the old regime (FY 2025-26):

Income Tax Slabs for Individuals (Below 60 years)

Net Income Range	Old Tax Regime
Up to ₹2,50,000	-
₹2,50,001 to ₹5,00,000	5%
₹5,00,001 to ₹10,00,000	20%
Above ₹10,00,001	30%

 

Income Tax Slabs for Senior Citizens (60 to 80 years)

Net Income Range	Old Tax Regime
Up to ₹3,00,000	-
₹3,00,001 to ₹5,00,001	5%
₹5,00,001 to ₹10,00,000	20%
Above ₹10,00,001	30%

Income Tax Slabs for Super Senior Citizens (80 years or more)

Net Income Range	Old Tax Regime
Up to ₹5,00,000	-
₹5,00,000 to ₹10,00,000	20%
Above ₹10,00,001	30%

Factors Affecting Income Tax Slab and Rates

These are some factors that affect which income tax slab you fit in:

• Total annual income: If you have a higher income, it means you fall into higher rate slabs.
• Age of the taxpayer: Individuals below 60, senior citizens (60‑80) and super senior citizens (80+) would have differing exemption limits.
• Residential status: Whether you’re a resident or non‑resident affects which income is taxable in India.
• Choice of tax regime: Opting for the old vs new tax regime alters your slabs and rules for deductions/exemptions.
• Type of taxpayer: Individuals, Hindu Undivided Families (HUFs), companies, etc., may fall into different tax categories.
• Government policy & timing: Slabs and rates are revised via the Annual Budget, so what applies in one year may change in the next.
• Surcharge and Cess: On top of regular tax, high‑earners may face a Surcharge and a standard Health & Education Cess, increasing the effective tax rate.

Different Types of Taxable Income in India

Taxable income is categorised under various heads, each having specific rules for calculation and taxation. Here are the main types:

• Income from Salary: Includes wages, pensions, bonuses, and other employment-related income. When you file your taxes, you should preferably submit Form 16 as proof of employment and income.
• Income from House Property: Income earned from renting or selling property, after deductions like municipal taxes and interest on home loans.
• Income from Business or Profession: Earnings from freelancing, entrepreneurship, or business activities, subject to deductions for business expenses.
• Income from Capital Gains: Profit from the sale of capital assets like real estate, stocks, or mutual funds, taxed at different rates based on holding period (short-term vs long-term).
• Income from Other Sources: Includes interest income, dividends, winnings from lotteries, gifts, etc., not falling under the other categories.

Deductions/Exemptions: Old vs New Regime (FY 2025-26)

Here is a comparative table listing key deductions for both the old and the new tax regimes:

Particular	Old Tax Regime (FY 2025‑26)	New Tax Regime (FY 2025‑26)
Standard Deduction (salaried/pensioner)	₹50,000	₹75,000
Rebate under Section 87A	Rebate on income up to ₹5 lakh (unchanged)	Rebate increased to ₹60,000 → effectively income up to ₹12 lakh is tax‑free
Deductions under Chapter VI‑A (e.g., Sections 80C, 80D, 80TTA etc.)	Section 80C (₹1.5 lakh for specified investments), Section 80D (₹25,000/₹50,000 for health insurance premiums), Section 80TTA (₹10,000 deductions for savings account interest)	Not allowed (except few like employer’s NPS contribution under Sec 80CCD(2))
House Rent Allowance (HRA) / Leave Travel Allowance (LTA) / Other salary allowances (Sec 10)	Available	Not available in new regime
Interest on self‑occupied house property (Sec 24(b))	Deduction allowed up to ₹2 lakh	Not available

Also Read: 9 Top Income Tax Saving Instruments You Must Know

Which is the Most Beneficial Tax Regime for FY 2025-26?

Before choosing the tax regime, consider your financial situation, deductions, and how easy you want the process. Here’s a comparison:

Old Tax Regime is beneficial to:

• Taxpayers who claim large deductions or exemptions (e.g., under Sections 80C, 80D, home‑loan interest, HRA).
• Individuals with multiple tax‑saving investments and higher taxable income, where deductions reduce liability significantly.

New Tax Regime is beneficial to:

• Taxpayers with few or no major deductions (i.e., not investing heavily in tax‑saving instruments) will likely prefer the new regime.
• Individuals with moderate income, where the lower rates under the new regime may yield lower tax even without deductions.

Both regimes have their own merits. It ultimately comes down to how much you can save under each regime based on your financial situation and goals.

Tips for Choosing Between Old and New Regimes

The new regime is the default option when filing your taxes, unless you actively switch to the old regime. Here are a few points to consider when making your choice:

• Calculate your taxable income: Estimate your income and apply deductions to understand how each regime affects your tax liability.
• Consider your ability to claim deductions: The old regime is beneficial if you claim substantial deductions (e.g., 80C, 80D), while the new regime is better if you cannot.
• Understand the impact of forfeiting deductions: The new regime forfeits deductions like HRA and 80C, which could affect your tax liability.
• Factor in future plans: The old regime may be preferable if you plan to invest in tax-saving instruments or need specific deductions in the future. So, business or professional income earners should plan carefully, as they can switch between regimes only once.
• Consult with a tax professional: Get expert advice tailored to your financial situation and future plans to make the most informed decision.

Surcharge, Cess, and Marginal Relief

Surcharge

• A surcharge is an additional tax levied on the basic income tax when the total income exceeds certain thresholds.
• For individuals, for example, taxable income above ₹50 lakh up to ₹1 crore triggers a 10% surcharge on the income‑tax amount.
• The surcharge rate can go up to 25% (or in some cases 37%) for very high incomes, though for certain types of income (like long‑term capital gains) the maximum surcharge rate is capped lower.

Cess

• A cess is a tax collected for a specific purpose; in the case of income tax, the “health and education cess” is applicable on the income tax plus surcharge.
• The current rate of cess is 4% of the income tax (including any surcharge) for all taxpayers.

Marginal Relief

• Marginal relief ensures that when income slightly exceeds a surcharge threshold, the extra tax (income tax + surcharge) does not create a disproportionately large tax burden.
• Specifically, for incomes just above a threshold, the total tax payable (tax + surcharge) is limited so that the tax burden does not increase by more than the income exceeding the threshold.

To Conclude

Understanding the differences between the old and new income tax regimes is crucial for making an informed decision about which is more beneficial for your financial situation. The new regime offers lower tax rates and simpler tax calculations, while the old regime provides opportunities for deductions and exemptions that can reduce your overall tax liability.

FAQs

What is the main difference between the old and new income tax regimes?

The old regime allows deductions and exemptions, while the new regime offers lower tax rates but fewer deductions.

Can I switch between the old and new tax regime each year?

Yes, individuals can choose either regime every financial year based on their financial situation.

Which tax regime is better for people with many tax-saving investments?

The old tax regime is better for individuals who claim deductions under sections like 80C, 80D, and HRA.