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

Income up to Rs. 12 lakhs can be practically tax-free due to the increase in rebate to Rs. 60,000. Though the new regime remains default, significant relaxations were made in the slab rates for FY 2025-26, while the income tax slabs remain the same for old-regime taxpayers.

Features of the Old and New Tax Regime

Particulars	New regime	Old Regime
Basic Exemption Limit	Rs. 4 lakhs	Rs. 2.5 lakhs
Maximum tax rate	30% (exceeding Rs. 24 lakhs)	30% (exceeding Rs. 10 lakhs)
Rebate	Rs. 60,000	Rs. 12,500
Zero Tax Salary	Rs. 12.75 lakh	Rs. 5.5 lakh
Zero Tax Income	Rs. 12 lakh	Rs. 5 lakh

Income Tax Slabs for FY 2025-26 under New Tax Regime

Budget 2025 has relaxed the tax slabs under the new regime significantly. A tabular version of the new tax regime slabs FY 2025-26 slab rates are given below.

• For taxpayers with a lot of tax-saving deductions, often summing up to a few lakhs, the old regime is the most beneficial.
• For taxpayers with limited tax-saving deductions and middle-class income earners, the new regime is the most beneficial.
• The following table shows the break-even deduction for different income levels. If the taxpayer has deductions above the break-even deductions, the old regime will be the most beneficial. Otherwise, the new regime will be the most desirable choice.

• It is most beneficial for the taxpayers if they choose their most beneficial regime at the beginning of the financial year.
• Taxpayers can estimate their total income, consolidate all their tax-saving deductions, and calculate the taxable income and total tax payable under both regimes to determine which regime is most beneficial.
• The following table shows the most beneficial regime for a deduction amount of Rs.4.5 lakhs.

How to Switch Regimes?

• If you have figured out that old regime is the most beneficial, you have to switch regime from new to old.
• On absence of making this choice, new regime will be chosen in default and you might end up paying more taxes.
• If you are a salaried employee without any business income, you can choose the old regime while filing the ITR.
• However, if you have business income and want to file under the old regime, form 10-IEA is applicable.
• Form 10-IEA needs to be filed on opting in and opting out of old tax regime.

Income Tax Calculator

Use our income tax calculator to ascertain tax liability under old and new regimes.

Tax Calculation Examples under the New Regime FY 2025-26 (AY 2026-27)

Example 1

Mr. Ramu had a salary income of Rs. 12 lakhs. He had invested Rs. 1.5 lakh in PPF and paid Rs. 30,000 towards health insurance of himself, spouse and children.  

For FY 2025-26, Mr. Ramu will have zero tax liability  under the new regime as his income is less than Rs. 12 lakh and is eligible for rebate u/s 87A. For the same income ad deduction combination, the tax liability under the old regime is Rs 1,10,760.

The bottom line: Income up to Rs. 12 lakhs will be practically tax free under the new regime in most cases for FY 2025-26.

Example 2 

Mr. Anban had a salary income of Rs. 25 lakhs in FY 2025-26. He lives in a rented accommodation and pays Rs. 45,000 p.m as rent and claimed Rs. 4 lakh HRA exemption. He also has a house property in his village for which he pays EMI. He also has deductions of Rs. 1.5 lakh u/s 80C, Rs. 50,000 u/s 80D and Rs. 50,000 u/s 80CCD(1B). 

For FY 2025-26 (AY 2026-27), his tax liability will be as follows:

• New Tax Regime: Rs. 3,19,800
• Old Tax Regime: Rs. 3,04,200

As the tax liability under the old tax regime was less, Mr. Anban chose to file his ITR under the old tax regime and saved Rs. 15,600 in taxes. This was because of the massive deductions worth Rs. 9 lakh that Mr. Anban could claim. Without these deductions, the new regime would have been beneficial for Mr. Anban. 

The Bottom Line: The old regime can also be more beneficial if you have sufficient tax saving deductions.  The new tax regime is apt for those taxpayers with fewer or no deductions to claims.

Example 3

Mr. K has the following income for FY 2025-26:

Salary income - Rs. 20 lakhs

Interest income on FDs - Rs. 20,000

He does not have any other income or tax saving deductions. The tax calculation for old and new regime are as follows:

Tax payable under the old regime (including cess) = Rs.4,19,640

Tax payable under the old regime (including cess) = Rs.1,96,560

Since, the taxpayer in this case do not have tax saving deductions, new regime is the most beneficial for him for FY 2025-26.

The Bottom Line: The new regime is the most beneficial regime for middle income earners in most cases, since most taxpayers don't have lakhs of tax saving deductions.  

How to Save Taxes under the New Regime FY 2025-26?

Though the options to save taxes under the new regime are limited, the new regime proves to be extremely beneficial with tax planning strategies in place. The following are the ways to save taxes under the new regime:

1.Employer’s Contribution to NPS u/s 80CCD(2)

The employer’s contribution can be claimed as a deduction under this section. Up to 14% of the basic pay can be claimed as a deduction under this section. When you opt for NPS, the employer and you will contribute to the pension scheme.

2.Standard Deduction

Irrespective of whether you have made tax saving deductions or not, you can claim a standard deduction of Rs. 75,000 against your salary income under the new regime.

For salaried individuals, a standard deduction of Rs. 75,000 is allowed under the new regime.

3.Choice of Perquisites

• You can opt for a car leasing scheme if it is provided by your company, through which you can save significant taxes. 
• Also, allowances like transport allowance, conveyance allowance, and daily allowance are exempt under the new regime.
• Various perquisites like mobile reimbursement, transport facility provided under railways or airways, etc. are exempt irrespective of the old or new regime.

Structure your CTC accordingly and derive the maximum tax advantage!

Income Tax Changes from 01st April, 2025 (FY 2025-26)

The following are the changes made with effect form 01st April, 2025.

1. Slab Rate Relaxation

As already discussed, the income tax slabs and tax rates are relaxed with effect from FY 2025-26 under the new regime. Income chargeable under the maximum tax rate - 30% has been increased from Rs. 15 lakhs to Rs. 24 lakhs. Basic exemption limit has been relaxed from Rs. 3 lakhs to Rs. 4 lakhs.

2.Rebate Relaxation

Previously, under the new regime, Rs. 25,000 of rebate is allowed, making the income within Rs. 7 lakhs practically tax-free. With effect from FY 2025 - 26, Rs. 60,000 of rebate is allowed for an income within Rs. 12 lakhs under the new regime. This makes income up to Rs. 12 lakhs tax-free.

3.Relaxation of TDS Threshold Limits

If the payment amount does not cross a certain limit during the financial year, no TDS needs to be deducted as per the provisions of the act. This threshold limit has been relaxed from FY 2025-26, making transactions with higher value not liable to TDS. This has eased the compliance burden. 

4.Deductions and Exemptions

The important changes brought this year with respect to deductions and exemptions are:

• All the tax benefits of the NPS account have now been extended to the NPS Vatsalya account.
• All the withdrawals from NPS are exempt from 29th August, 2025.
• The tax benefits available to eligible start-ups under section 80-IAC have now been extended until 2030.

Budget 2026 Expectations 

For the budget 2026, substantial slab relaxations and tax benefits this year appears less likely, as budget 2025 has already provided significant relief to middle income earners by increasing the tax free limit and relaxing the tax slabs. However, measures ensuring easier and stricter compliance might be expected in the upcoming budget.

Tax Savings due to New Income Tax Slabs - FY 2025-26

The following table illustrates the tax savings under the new regime for FY 2025-26, compared to the preceding financial year. The income provided in the first column is the taxable income, that is, income after reducing all the eligible deductions and exemptions under the new regime. This tax saving is fully attributed to relaxation of slab rates.

Surcharge

Surcharge simply refers to tax on tax. It is levied on a percentage of tax, not income. When the taxable income of an individual crosses the limit of Rs. 50 lakhs, surcharge is applicable. The following table provides the surcharge rates for different income groups.

For dividends and capital gains income under section 111A, 112A and 112, the maximum surcharge amount is capped at 15%, even if such income crosses the threshold limit of Rs. 2 crore.

Cess

In addition to the income tax and surcharge, a health and education cess of 4% is levied in all cases. Cess is applicable wherever there is income tax payable.

Rebate

• When your total taxable income is within a certain threshold limit, a rebate helps reduce the tax liability to zero.
• The rebate allowed differs based on the choice of regime and the financial year. 
• Under the new regime, marginal relief on rebate is available, unlike under the old regime.
• With effect from FY 2025-26, the rebate is not available on special tax income. For example, capital gains, online gaming income, etc.

The following table shows the rebate applicability for FY 2025-26 under new and old regime.

Note: In all the above cases, the rebate makes the total tax liability zero.

Conclusion

The best tax regime depends on the income, deductions and exemptions available to the taxpayer. Taxpayer with high deductions can opt form the old tax regime, else taxpayers with less deductions can opt for the new tax regime as the new tax regime offers relaxed tax slab rates. Hence, it is essential for taxpayers to understand both the concepts inorder to plan their taxes efficiently.