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

Taxpayers in India have the choice between the old and new tax regime slabs. For FY 2025-26, the new tax regime contains significant changes, with rates being lower due to lower inflation and the slab limit being higher.

While the tax season often causes more uncertainty than clarity, the new tax slab introduction can make it even more 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 most recent tax slabs for FY 2025–2026 and what they mean for you.

What Are Income Tax Slabs?

Tax brackets, often known as income tax slabs, are essentially income groups that determine the applicable tax rates. Slabs are progressive, which means that the tax on your remaining income increases as your income does. This protects the lower-income earners and taxes the high-income earners more.

For example, if your income falls within each tax slab, only the portion over the last slab limit is taxed at the higher tax rate, not your entire income. In some cases, a Section 87A rebate for lower income could negate your tax.

India currently has two tax regimes, the old regime with deductions to reduce taxable income and the new regime (launched in March 2020 and relayed in the Budget 2025) that has the slabs while limiting the number of exemptions.

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

Changes in Income Tax Slabs for FY 2025-26

Union Budget 2025 has made some important changes to the new tax regime slabs to increase take-home pay, particularly for middle-income earners. The basic exemption limit in the new tax regime has increased to ₹4 lakh. The new tax regime also has more slabs and lower rates for incomes up to ₹24 lakh.

The Section 87A rebate was increased to ₹60,000 from ₹25,000, which could potentially give taxpayers with incomes up to ₹12 lakh a tax zero. There was no change to the structure of the old tax regime, but it is favourable to taxpayers claiming significant deductions.

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

Income Tax Slabs Under The New Regime for the Financial Year 2025–2026

Budget 2025 introduced a new regime to increase the take-home pay in the hands of individuals in the middle. There are additional slabs with gradual increases and a ₹4 lakh basic exemption (revised from ₹3 lakh). This also included limited deductions of two types i.e., standard (₹75,000 for salaried individuals) and employer NPS contributions.

New Tax Regime Slabs 2025 (Default)

• Deductions/Exemptions: The majority of deductions are not permitted (except the Standard Deduction and the Employer NPS contribution)
• Standard Deduction: ₹75,000
• Section 87A Rebate: This rebate is applicable on taxable income to an amount of ₹12 lakh (max ₹60,000).

Section 87A rebate has also increased to ₹60,000 (revised from ₹25,000), which means that your tax liability will be zero for income of up to₹12 lakh. The CESS and surcharge provisions have remained unchanged. Overall, this is again a simple way of calculating tax, and if you earn up to ₹24 lakh, this is a much lighter burden. For example, people earning Rs. 10 lakh will have a lower tax liability here than under the old regime, even without any deductions.

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

Old Tax Regime

The primary distinction between the old and the new tax regime is the deductions/exemption treatment and the tax slab regime. The new regime provides reduced, less complicated rates, but eliminates the majority of tax-saving alternatives. The old regime permits full deductions and exemptions.

• Deductions/Exemptions: All the standard deductions and exemptions permitted, including HRA, LTA, 80C (₹1.5 lakh), 80D (Health Insurance), 80CCD(1B), etc.
• Standard Deduction: ₹50,000
• Section 87A Rebate: This is applicable on taxable income up to ₹5 lakh (max ₹12,500).

Which Tax Regime Is Better, the Old or the New?

Here is how you can evaluate the tax benefits of both regimes to help you make your choice:

• The key benefits of the old regime are the deductions that further reduce your taxable income, like HRA, LTA, Home Loan interest, etc.
• The benefits of the new regime are lower tax rates and less paperwork. This is perfect for individuals who do not have much in the way of investments. It is suitable for those with incomes of up to ₹12 lakh annually.
• Under the old regime (with ₹2 lakh deductions), the taxable income of ₹10 lakh leads to ₹1,12,500 tax, whereas in the new regime, the same income attracts only ₹50,000 after rebate.

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

To Conclude

The FY 2025-26 tax slabs provide a taxpayer-friendly enhancement, particularly via the new regime with lower rates and ₹60,000 allowance. You can choose the old tax slab if you can deduct, or the new if you prefer simplicity. Whether you choose the old or the new tax slab for 2025, it is always recommended to watch out for government websites for any updates and consult with your advisors to legally minimise your tax impact.

Frequently Asked Questions

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 stand at ₹4 lakh. This implies that people with income up to ₹4 lakh per year will not have 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 a level of ₹60,000. As a result, taxpayers earning a total income of up to Rs 12 lakhs may not have to pay any income tax at all.

Are there different tax slabs for senior citizens?

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

How do I calculate my income tax for 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, and 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. In case of income between₹50 lakh and ₹1 crore, tax surcharge is at 10% and so on, as per the higher income.