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

Income tax is a direct tax with a progressive slab system, meaning tax rates increase with higher income. Taxpayers can choose between:

• Old Regime– Includes deductions and exemptions to reduce taxable income.

• New Regime – Offers lower tax rates but excludes deductions and exemptions.

This article compares both regimes to help you choose the most beneficial option.

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

The Budget 2025 has revised the income tax slabs for FY 2025-26 (AY 2026-27). Under the new tax regime, individuals earning up to ₹12 lakh will have zero tax liability. The updated tax structure aims to provide relief and encourage more taxpayers to adopt the new regime.

Income Tax Slabs	Income Tax Rates
Upto Rs.4 lakh	NIL
Rs. 4 lakh – Rs.8 lakh	5%
Rs.8 lakh – Rs.12 lakh	10%
Rs.12 lakh – Rs.16 lakh	15%
Rs.16 lakh – Rs.20 lakh	20%
Rs.20 lakh – Rs.24 lakh	25%
Above Rs.24 lakh	30%

With the revised tax structure, individuals earning up to ₹12 lakh will have no tax liability due to a ₹60,000 rebate. For salaried individuals, incomes up to ₹12.75 lakh will be tax-free, considering the ₹75,000 standard deduction.

Note:

• Marginal relief on the rebate still applies.
• The rebate does not apply to income taxed at special rates (e.g., capital gains under Section 112A).

 

Revised Tax Savings Across Different Income Levels

The revised tax slabs will result in significant savings for taxpayers. Below is a breakdown of tax savings at different income levels:

Taxable Income	New Regime (Pre Budget 2025)	New Regime (Post Budget 2025)	Savings	Savings %
10,00,000	44,200	0	44,200	100%
12,00,000	71,500	0	71,500	100%
15,00,000	1,30,000	97,500	32,500	25%
18,00,000	2,15,800	1,50,800	65,000	30%
20,00,000	2,78,200	1,92,400	85,800	31%
25,00,000	4,34,200	3,19,800	1,14,400	26%
30,00,000	5,90,200	4,75,800	1,14,400	19%
40,00,000	9,02,200	7,87,800	1,14,400	13%

Here’s a breakdown of tax liability and rebate eligibility across various income levels:

Case 1 – Income of ₹10.50 lakh
If your total income is ₹10.50 lakh, your tax liability will be zero. Since your income is below ₹12 lakh, you will qualify for the rebate under Section 87A.

Case 2 – Income of ₹12.75 lakh (Salaried Individual)
If you earn ₹12.75 lakh and are a salaried individual, your tax will also be zero. After claiming the standard deduction of ₹75,000, your taxable income reduces to ₹12 lakh, making you eligible for the Section 87A rebate.

Case 3 – Income of ₹14.50 lakh
If your income is ₹14.50 lakh, you will not qualify for the rebate as your taxable income will exceed the rebate limit.
After deducting the standard deduction of ₹75,000, your taxable income will be ₹13.75 lakh, and tax will be calculated as per the applicable slab rates.

Tax Calculation:

Slabs	Rate	Calculation	Amount
Rs. 0 – Rs. 4 lakhs	0%	Not applicable	Nil
Rs. 4 lakhs – Rs. 8 lakhs	5%	4,00,000 x 5%	20,000
Rs. 8 lakhs – Rs. 12 lakhs	10%	4,00,000 x 10%	40,000
Rs. 12 lakhs – Rs. 13.75 lakhs	15%	1,75,000 x 15%	26,250
Total Tax Liability			86,250

 

Key Takeaways:

✔ Income up to ₹4 lakh is completely tax-free.
✔ Non-salaried individuals earning up to ₹12 lakh will have zero tax liability due to the Section 87A rebate.
✔ Salaried individuals with income up to ₹12.75 lakh will pay no tax after claiming the ₹75,000 standard deduction and rebate.
✔ Income above ₹12.75 lakh will be taxed as per the applicable slab rates.

Marginal Relief in Income Tax

Marginal relief benefits taxpayers whose income slightly exceeds Rs. 12,00,000 for FY 2025-26, ensuring that the tax payable does not significantly exceed the additional income earned.

Example: Marginal relief Calculation at the income level Rs. 12,60,000:

Income Details	Amount
Income threshold for zero tax (A)	Rs. 12,00,000
Total Income (B)	Rs.12,60,000
Taxable Income	Rs. 12,60,000
Excess Income (C = B-A)	Rs. 60,000
Tax Liability on ₹12,60,000 at slab rate (D)	Rs. 69,000
Marginal Relief (D-C)	Rs. 9,000
Tax Payable due to Marginal Relief (Lower of C and D)	Rs. 60,000

*Calculation is done excluding cess

Surcharge on Income Tax:

Surcharge rates are as below:

Total Income	Surcharge Rate
> Rs. 50 lakh and < Rs. 1 crore	10%
> Rs. 1 crore and < Rs. 2 crore	15%
> Rs. 2 crore and < Rs. 5 crore	25%
> Rs. 5 crore	37%

A surcharge is an additional tax levied on high-income earners whose income exceeds a specified threshold. It is charged over and above the existing tax rates.

Revised Surcharge Rates Under the New Tax Regime

• The highest surcharge rate has been reduced from 37% to 25% (effective from 1st April 2023).
• Dividend and capital gains taxable under Sections 111A, 112A, and 115AD are subject to a maximum surcharge of 15%.
• AOP (Association of Persons) consisting entirely of companies will also have a surcharge capped at 15%.
• An additional 4% Health & Education Cess applies to the total income tax liability.

Exemptions and Deductions Not Available Under the New Tax Regime

Under the new tax regime, taxpayers cannot claim several common deductions and exemptions are as follow:

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

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.

Income Tax Slabs for FY 2024-25 (AY 2025-26) Under New Tax Regime

The tax slabs for FY 2024-25 (AY 2025-26) are as follows:

Income Tax Slabs	Income Tax Rates
Up to Rs. 3 lakh	NIL
Rs. 3 lakh – Rs. 7 lakh	5%
Rs. 7 lakh  – Rs.10 lakh	10%
Rs. 10 lakh  – Rs.12 lakh	15%
Rs.12 lakh  – Rs.15 lakh	20%
Above Rs.15 lakh	30%

Important Notes:

✔ Rebate: A ₹25,000 tax rebate is available for total income up to ₹7 lakh (not for NRIs), making it tax-free.
✔ Standard Deduction: Salaried employees can claim a ₹75,000 standard deduction under the new tax regime.
✔ Family Pension Deduction: The deduction on family pension has increased from ₹15,000 to ₹25,000.
✔ NPS Contribution: Employer’s contribution to NPS is deductible up to 14% for FY 2024-25.
✔ Tax Savings: These changes can help a salaried employee save up to ₹17,500 in taxes under the new regime.
✔ Default Regime: The new tax regime is the default. To opt for the old regime, individuals must file Form 10-IEA.
✔ Surcharge Rate: The highest surcharge under the new regime is 25%, compared to 37% in the old regime.

Revised Income Tax Slabs Under the New Regime

The government has revised the tax slabs for FY 2024-25, introducing relaxations to benefit taxpayers. Below is a summary of the key changes:

Income Tax Slabs for FY 2023-24	Tax Rates (FY 2023-24)	Income Tax Slabs for FY 2024-25	Tax Rates (FY 2024-25)	Changes
Up to Rs.3 lakh	NIL	Up to Rs.3 lakh	NIL	No Change
Rs.3 lakh – Rs.6 lakh	5%	Rs.3 lakh – Rs.7 lakh	5%	Slab expanded by Rs.1 lakh
Rs.6 lakh – Rs.9 lakh	10%	Rs.7 lakh – Rs.10 lakh	10%	Slab expanded by Rs.1 lakh
Rs.9 lakh – Rs.12 lakh	15%	Rs.10 lakh – Rs.12 lakh	15%	No Change in Rate; New Threshold
Rs.12 lakh – Rs.15 lakh	20%	Rs.12 lakh – Rs.15 lakh	20%	No Change
Above Rs.15 lakh	30%	Above Rs.15 lakh	30%	No Change

Income Tax Slabs for FY 2024-25 (AY 2025-26) – Old Regime

The Budget 2024 did not introduce any changes to the old tax regime. The tax slabs remain the same as in the previous financial year:

Income Slabs	Age < 60 years & NRIs	Age of 60 Years to 80 years (Resident Individuals)	Age above 80 Years (Resident Individuals)
Up to Rs.2.5 lakh	NIL	NIL	NIL
Rs.2.5 lakh – Rs.3 lakh	5%	NIL	NIL
Rs.3 lakh – Rs.5 lakh	5%	5%	NIL
Rs.5 lakh – Rs.10 lakh	20%	20%	20%
Rs.10 lakh and above	30%	30%	30%

NOTE: Surcharge and cess will be applicable.

Old vs New Tax Regime: Slabs Comparison for FY 2024-25 (AY 2025-26)

Here’s a comparison of the tax slabs under the old and new tax regimes for FY 2024-25 to help taxpayers choose the most beneficial option.

Tax Slabs	Old Tax Regime Rates	New Tax Regime Rates
Up to Rs.2.5 lakh	NIL	NIL
Rs.2.5 lakh – Rs.3 lakh	5%	NIL
Rs.3 lakh – Rs.5 lakh	5%	5%
Rs.5 lakh – Rs.6 lakh	20%	5%
Rs.6 lakh – Rs.7 lakh	20%	5%
Rs.7 lakh – Rs.9 lakh	20%	10%
Rs.9 lakh – Rs.10 lakh	20%	10%
Rs.10 lakh – Rs.12 lakh	30%	15%
Rs.12 lakh – Rs.15 lakh	30%	20%
Rs.15 lakh and above	30%	30%

Income Tax Rate for Domestic Companies

Particulars	Old regime Tax rates	New Regime Tax rates
Company opts for section 115BAB (not covered in sections 115BA and 115BAA) & is registered on or after October 1, 2019, and has commenced manufacturing on or before 31st March 2024 and subject to the conditions specified in the section.	–	15%
Company opts for Section 115BAA, wherein the total income of a company has been calculated without claiming specified deductions, incentives, or exemptions and additional depreciation as specified in the section.	–	22%
The company opts for section 115BA registered on or after March 1, 2016 and engaged in the manufacture of any article or thing and does not claim the deduction as specified in the section.	–	25%
Turnover or gross receipt of the company is less than Rs.400 crore in the previous year 2020-21	25%	25%
Any other domestic company	30%	30%

 

*Please refer to the new sections for checking the applicability for the above concessional income tax rates.

Important Note:

• Additional Health and Education cess at the rate of 4 % will be added to the income tax liability in all cases.
• Surcharge applicable for companies is as below:
• 7% of Income tax where total income > Rs.1 crore,
• 12% of Income tax where total income > Rs.10 crore,
• 10% of income tax where domestic company opted for section 115BAA and 115BAB.

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

A partnership firm/ LLP is taxable at 30%.
Important 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	Tax Rates for Individual & HUF Below the Age Of 60 Years & NRIs
Up to Rs.2.5 lakh*	Nil
Rs.2.5 lakh to Rs.5 lakh	5%
Rs.5 lakh to Rs.10 lakh	20%
Above Rs.10 lakh	30%