The financial year 2025-26 introduces major changes to India’s income tax structure. With revised tax slabs, a higher basic exemption limit, and an enhanced rebate under Section 87A, the New Tax Regime has become more favourable for a majority of taxpayers.
This guide provides a clean, clear, and professional breakdown of the latest income tax rates applicable from 1 April 2025 for AY 2026-27 under both regimes.
1. New Tax Regime – Revised Slabs for FY 2025-26
The New Tax Regime is now the default option for all taxpayers.
New Income Tax Slabs (FY 2025-26)
| Annual Income (₹) | Tax Rate |
|---|---|
| Up to ₹4,00,000 | 0% |
| ₹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% |
Key Features
- Basic exemption limit increased to ₹4,00,000
- Standard deduction of ₹75,000 for salaried and pensioners
- Section 87A rebate provides zero tax up to ₹12,00,000 income
- Most deductions are removed to simplify taxation
- Ideal for taxpayers with fewer deductions
2. Old Tax Regime – Slabs for FY 2025-26
The Old Regime continues to be available for those who wish to claim deductions and exemptions such as 80C, 80D, HRA, NPS, and home loan interest.
Old Regime Slabs – Individuals Below 60 Years
| Annual Income (₹) | Tax Rate |
|---|---|
| Up to ₹2,50,000 | 0% |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Senior and Super Senior Citizens
- Senior Citizens (60–80 years): Basic exemption ₹3,00,000
- Super Senior Citizens (80+ years): Basic exemption ₹5,00,000
3. New Regime vs Old Regime: Which Is Better?
Choose the New Regime if:
- You do not claim many deductions
- You want a simple tax structure
- Your income is up to ₹12,00,000 (rebate eliminates tax)
- You prefer lower compliance and paperwork
Choose the Old Regime if:
- You claim high deductions under 80C, 80D, HRA, home loan interest, etc.
- Your total deductions exceed ₹3–4 lakh
- You can substantially reduce taxable income using exemptions
Recommendation:
Always compute tax under both regimes and choose the lower tax option.
4. Example Tax Comparison – Salary ₹12,00,000
Under New Regime:
- Standard deduction = ₹75,000
- Taxable income = ₹11,25,000
- Eligible for Section 87A rebate
- Total tax = Zero
Under Old Regime:
- Even after 80C, 80D, HRA etc., tax usually remains payable
- New regime is more beneficial for most salaried individuals
5. Key Points for FY 2025-26 (AY 2026-27)
- New regime is the default; old regime must be opted specifically
- TDS by employers will be based on the new regime unless the employee chooses otherwise
- Standard deduction is available under the new regime
- Zero tax up to ₹12,00,000 with rebate
- Old regime is useful only for high-deduction taxpayers
FAQ – Income Tax FY 2025-26 (AY 2026-27)
1. What is the new basic exemption limit?
₹4,00,000 under the new regime.
2. Is the new tax regime compulsory?
No. It is default, but taxpayers can choose the old regime.
3. What income is tax-free under the new regime?
Up to ₹12 lakh after rebate under Section 87A.
4. Can I claim 80C, 80D or HRA in the new regime?
No, most deductions are not allowed (except standard deduction).
5. Is standard deduction allowed in the new regime?
Yes, ₹75,000 for salaried/pensioners.
6. Do I need to inform my employer?
Yes, if you want the old regime; otherwise, TDS is deducted under the new regime.
Conclusion
The revised New Tax Regime for FY 2025-26 offers a higher exemption limit, reduced tax burden, and simpler compliance. It is beneficial for most middle-class and salaried taxpayers, especially due to the rebate that makes income up to ₹12 lakh tax-free.
However, individuals with significant deductions may still benefit more under the Old Regime.
Always compare tax under both regimes before filing your ITR for AY 2026-27 to choose the most cost-effective option.
Short Summary
Income tax slabs have been updated for FY 2025-26. The new regime offers a higher exemption limit of ₹4 lakh, simpler slabs, and zero tax up to ₹12 lakh after rebate. The old regime remains optional for deduction-heavy taxpayers. The new regime is now the default and is beneficial for most individuals.
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