New Income Tax Slabs for 2025-26: What Do the New Slabs Mean for You?

Taxpayers in India can now opt for either the old or new tax regime slabs when filing their taxes. With the introduction of the latest income tax slabs for FY 2025-26, it could be confusing to determine your ideal tax regime and tax liability. This choice directly impacts your income, expenses, and deductions. In this blog, we will explore the key changes in the new tax regime, its benefits, and how to calculate tax under the new regime.

What Are Income Tax Slabs?

India’s income tax system is progressive, meaning only the portion of income within each slab is taxed at that slab’s rate. There are two tax regimes:

• Old regime: Higher rates but allows deductions and exemptions (like 80C, HRA, etc.)
• New regime: Lower rates but removes most deductions and exemptions

Example under the new regime:

If your income is ₹8 lakh, and the slab rates are:

• ₹0–₹3 lakh: 0%
• ₹3–₹6 lakh: 5%
• ₹6–₹9 lakh: 10%

Then:

• ₹3 lakh is tax-free
• ₹3 lakh (₹3–₹6 lakh) taxed at 5% = ₹15,000
• ₹2 lakh (₹6–₹8 lakh) taxed at 10% = ₹20,000
• Total tax = ₹35,000

Low-income taxpayers may be eligible for a Section 87A rebate, which can reduce their tax to zero.

Also Read:A Guide to Tax-Saving Options Under Section 80C

Changes in Income Tax Slabs for FY 2025-26

The Budget 2025 introduced significant changes to the new tax regime, aimed at enhancing take-home pay, especially for middle-income earners. The basic exemption limit has been raised to ₹4 lakh, and the new regime now also includes additional slabs with lower rates for incomes up to ₹24 lakh.

The Section 87A rebate has been increased to ₹60,000 from ₹25,000, potentially allowing taxpayers with incomes up to ₹12 lakh to pay zero tax. Although there were no changes to the structure of the old tax regime, it remains beneficial for taxpayers who can take advantage of substantial deductions.

Also Read:What is CGST & SGST? Meaning, Differences Explained

In addition, there were some other changes made to income taxes after April 2025:

Enhanced TDS Thresholds

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

Tax Exemption for Start-ups

• Under Section 80-IAC, start-ups that are incorporated before 1st April 2030 will get a 100% tax deduction on profits for the first 3 years out of 10 years.

New Income Tax Slabs for FY 2025-26

The tax rates in the new regime have been revised to provide more relief for middle-income earners, with higher exemption limits and lower rates for income up to ₹24 lakh. Additionally, the Section 87A rebate has been increased to ₹60,000 from ₹25,000, potentially allowing taxpayers with an income of up to ₹12 lakh to pay no tax at all.

Here’s a look at the detailed tax structure under the new regime:

Net Income Range (FY 2025-26)	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%

Different Income Tax Slab Rates

In the new tax regime for FY 2025-26, the income tax slabs remain the same for all taxpayers, regardless of their age. The absence of age-based tax slabs makes the regime simpler; however, it also means that senior citizens, who previously benefited from higher exemptions under the old regime, may not receive the same level of relief.

To determine which tax regime benefits you the most, compare the available deductions and exemptions under the old regime with the reduced deductions in the new regime. For individuals who rely on various tax-saving instruments, such as deductions under 80C or HRA, the old regime may still be more beneficial.

Here’s a look at the income tax slabs of the old regime:

Net Income Range	Individuals below 60 years	Senior Citizens (60 to 80 years)	Super Senior Citizens (Above 80 years)
Up to ₹2,50,000	-	-	-
₹2,50,001 to ₹3,00,000	5%	-	-
₹3,00,001 to ₹5,00,000	5%	5%	-
₹5,00,001 to ₹10,00,000	20%	20%	20%
Above ₹10,00,001	30%	30%	30%

Benefits of the New Regime (FY 2025-26)

• Lower tax rates across wider income slabs, helping increase take-home income.
• More straightforward tax structure.
• No need to calculate or track multiple deductions and exemptions.
• Reduced paperwork and lower compliance burden.
• Ideal for individuals who do not invest heavily in tax-saving instruments.
• Standard deduction of ₹75,000 is still available under the new regime.

Drawbacks of the New Regime (FY 2025-26)

• Minimal deductions and exemptions compared to the old regime.
• Popular deductions like 80C, 80D, HRA, and LTA are not available.
• Fewer opportunities for tax planning through investments.
• May lead to higher tax liability for individuals who use multiple deductions under the old regime.
• Not suitable for those who depend on allowances and exemptions to reduce taxable income.

Also Read: Middle-class Relief: How GST Cuts on Daily Essentials Will Boost Purchasing Power

How to Calculate Tax Under the New Regime FY 2025-26

The new tax regime is the default option when filing taxes, unless the user changes it. Here’s a breakdown of simple steps to calculate tax under the new regime for FY 2025-26:

1. Calculate Total Taxable Income

• Add all income sources (salary, house property income, capital gains, etc.).
• Apply available deductions (like ₹75,000 standard deduction, interest on home loan, NPS contribution, etc.).

2. Apply the Income Tax Slab Rates

Income Range (₹)	Tax Rate
Up to ₹4,00,000	No tax
₹4,00,001 to ₹8,00,000	5%
₹8,00,001 to ₹12,00,000	10%
₹12,00,001 to ₹16,00,000	15%
₹16,00,001 to ₹20,00,000	20%
₹20,00,001 to ₹24,00,000	25%
Above ₹24,00,000	30%

3. Check for Rebate, Surcharge, and Cess

• Rebate (Section 87A): If total taxable income is up to ₹12,00,000, you get a rebate of up to ₹60,000 (making the tax liability zero).
• Surcharge: An Additional surcharge applies if the total income exceeds certain higher thresholds for individuals.
• Cess: A 4% health and education cess is levied on the total tax liability.

Once you've applied the income tax slab rates and checked for rebates, surcharge, and cess, you’ll have your net tax liability for the year under the new regime. This process ensures that the tax calculation is both accurate and in line with the revised tax structure.

Also Read:GST Reduction on Bikes in India 2025: How It Could Affect Your Loan Plan

To Conclude

The new income tax regime for FY 2025-26 provides greater relief to middle-income earners through reduced tax rates and simplified processes. The increased rebate under Section 87A and enhanced TDS thresholds offer added benefits, especially for taxpayers with income up to ₹12 lakh. However, it comes with limitations in deductions compared to the old regime, making it more suitable for those who do not rely heavily on tax-saving instruments.

FAQs

What is the basic exemption limit in a new tax regime for FY 2025-26?

In the new tax structure for FY 2025-26, the government has increased the basic exemption amount to ₹4 lakh. This implies that individuals with an annual income of up to ₹4 lakh will not be required to pay any income tax.

What is the rebate in Section 87A for FY 2025-26?

Under the new regime, the Section 87A rebate has been increased to ₹60,000. As a result, taxpayers with a total income of up to ₹12 lakhs may not be required to pay any income tax.

Are there different tax slabs for senior citizens?

Yes, under the old regime, senior citizens (aged 60-80 years) and super senior citizens (aged over 80 years) had a better basic exemption threshold. On the other hand, all taxpayers, regardless of age, are subject to the identical slabs under the new regime.

How do I calculate my income tax for FY 2025-26?

You can calculate your income tax using the online calculator on the official website of the Income Tax Department. Enter your yearly income, deductions, if applicable, your choice of regime, and get an accurate tax estimate.

What happens if my income surpasses ₹50 lakh in FY 2025-26?

If your income is higher than a certain threshold of ₹50 lakh, a surcharge will be levied along with regular income tax. For income between ₹50 lakh and ₹1 crore, a tax surcharge of 10% applies, and so on, as per the higher income.