Income Tax Slab in India: New Income Tax Slab for FY 2025-26

What is the Income Tax Slab in India?

The income tax slab is the range of income levels for categorising taxpayers based on their annual income in a financial year.  It defines how much tax an individual/business is required to pay for different levels  of income. Income tax slab in India ensures a fair and progressive taxation structure in which an individual or business earning a higher income is taxed at higher rates than those with lower income.

Income tax in India is governed by the Income Tax Act, 1961, which is revised and amended from time to time to incorporate changes and may vary. For instance, the old tax regime has different slabs for different categories, such as individuals who are below 60 years of age, senior citizens (individuals above 60 years of age) and super senior citizens (individuals above 80 years of age).However, the new regime has no such distinction.  For the financial year 2025-26 (Assessment Year 2026-27), the new tax regime is now the default regime, but the taxpayers can opt for the old tax regime if beneficial. 

In the Union Budget 2025, the Government of India has introduced changes in the income tax slabs under the new tax regime, which will come into effect on 1^st April, 2025 and will be applicable for the Financial Year 2025-26. Understanding the income tax slabs in India is important for effective tax planning and selecting the right tax regime.

 

Income Tax Slab Rates for FY 2025 – 26

India's income tax rate under the new regime applicable for FY 2025-26 is as follows:

In the Union Budget 2025, the basic tax exemption limit under the new tax regime has been increased from Rs 3 lakh to Rs 4 lakh¹, and a new income tax slab in India has been introduced. Further, taxpayers with incomes up to Rs 12 lakhs can claim a rebate up to Rs 60,000 under Section 87A, effectively bringing the tax liability to zero for incomes up to Rs 12 lakhs¹. The rebate is not applicable to the incomes on which a special tax rate is applicable, such as capital gains, online gaming income, crypto gains, etc¹.

Further, no change has been made in the income tax slabs under the old regime. Any individual can opt for the old tax regime if it is more beneficial. The basic exemption limit under the old tax regime for individuals up to the age of 60 years is Rs. 2.5 lakhs, for senior citizens (aged 60 years to 80 years) is Rs. 3 lakhs and for super senior citizens (aged above 80 years) is Rs. 5 lakhs. India's income tax rate under the old regime applicable for FY 2025-26¹ is as follows:

 

Eligibility for Income Tax in India

Income tax in India is payable by every person earning an income in a financial year. Under Section 2(3)4 of the Income Tax Act of 1961, a ‘person’ is defined as a natural individual as well as an artificial person or entity.

To simplify, income tax is payable by the following⁴–

• Individuals
• Hindu Undivided Families
• Corporates
• Association of Persons
• Body of Individuals
• Limited Liability Partnerships
• Firms
• Local authorities
• Any other artificial juridical person

That being said, income tax is payable on income that exceeds the basic threshold limit specified by the income tax department. Currently, for the financial year 2025-26, the threshold limits are as follows¹ –

There are no special slabs or a higher exemption limit for senior and super senior citizens under the new regime⁵.

Note:

• From FY 2025–26, the new tax regime allows salaried individuals to earn up to ₹12.75 lakh without paying any tax, once the standard deduction and rebate are applied¹.
• The threshold limit in the new regime  has been raised, making income up to ₹12 lakh non-taxable under this regime¹.
• However, this rebate benefit excludes income that’s taxed at special rates, such as capital gains or online gaming earnings¹.
• In contrast, under the old tax regime, income of up to ₹5 lakh remains fully exempt from tax¹.

Example of Tax Payable Under New & Old Tax Regimes

The tax payable under the new and old tax regimes can be understood with a simple example. Consider the following scenario –

An individual aged 50 years has a salary income of Rs.40 lakhs a year. He invests Rs.1.5 lakhs in 80C and has a health insurance premium of Rs. 20,000 for his family and Rs.30,000 for his senior citizen parents.

The net taxable income under both regimes will be calculated as follows –

 

Disclaimer - Above example is only for illustration purpose.

 

The tax payable would be calculated as follows –

Disclaimer - Above example is only for illustration purpose.

 

Deductions & Exemptions Allowed in the New Tax Regime

Under the New Tax Regime in India, taxpayers benefit from lower tax rates and simplified tax slabs but have very limited deductions and exemptions in comparison to the Old Tax Regime.

 

Standard Deduction:

Standard deduction was introduced in the new tax regime in the Union Budget 2023³ at Rs. 50,000, which was increased to Rs. 75,000 in Budget 2024. Taxpayers can claim a standard deduction of Rs. 75,000 under the new tax regime in the Financial Year 2025-26. This standard deduction is available only for Salaried Individuals or individuals having pension income.

Employer’s Contribution to NPS for the benefit of employee [Section 80CCD(2)]⁴:

Taxpayers can claim deductions of 14% of the basic salary for the employer’s contribution to the NPS Tier-1 account under Section 80CCD(2) of the Income Tax Act, 1961, either contributed by the Central or State Government or by any other employer, but under the New Tax Regime, whereas the maximum deduction is 10% under the Old Tax Regime⁴. The deduction is available over and above the limit of Rs. 1.5 lakhs provided for combined investments under Section 80CCE⁴.

 

Section 80JJAA:

Section 80JJAA of the Income Tax Act, 1961 offers 30% of the additional employee cost for three consecutive assessment years, encouraging employment generation by the businesses in India⁶. 

 

Section 80CCH(2):

Section 80CCH(2) of the Income Tax Act 1961 allows deductions to Agniveer for contributions made to Agniveer Corpus Fund. It is meant for individuals enrolled under the Agnipath scheme, allowing the contribution made both by the individual and an equal contribution by the Central Government to be eligible for deduction under 80CCH.

 

How to Calculate Income Tax Using Tax Slabs?

Income tax can be calculated based on the income level of the individual, and following applicable tax slab rates. You can also use Income Tax Calculators available online to calculate income tax based on your total taxable income. 

 

Determine Taxable Income:

Determine your taxable income by adding up all the sources of Income and subtracting eligible deductions and exemptions, such as the standard deduction, Section 80C, if available, etc., from your gross total income to get your total taxable income.

 

Apply Slab Rates:

Then, apply the tax slab rates as per the chosen income tax regime to each portion of the income progressively to get your tax liability. If you are a salaried individual, you can calculate the tax liability by applying slab rates on your taxable income under both regimes and choose the one with the lower tax liability.

 

Add Cess:

After computing your tax liability, add the health and education cess of 4% to the tax amount.

 

Total Tax Liability:

Your total tax liability will be the sum of your tax computed as per income tax slabs, add 4% cess, subtract the applicable rebates and tax reliefs, if any, which will be the final amount to be payable to the government.

 

Difference Between New Tax Regime and Old Tax Regime

The Union Budget 2023 made tremendous changes in the new tax regime making it more rewarding for taxpayers,. However, the old tax regime also has its benefits. So, let’s assess the pros and cons of both regimes–

 

Old tax regime

 

New tax regime

If you are wondering which one you should pick, the answer depends on your income level and the tax-saving investments and expenses that you have incurred. You can calculate your tax liability under both regimes to find out which regime is offering the lowest amount. Then, choose the regime and save on the tax outgo. As salaried individuals, you can switch between the old and new tax regimes every time you file your returns.

So, assess which regime is giving you the maximum tax saving and then make the choice.

If you compare the slab rates under the new and old tax regimes, you would notice the difference. Let’s highlight the differences in the following table, considering the changes made to the new regime in the Union Budget 2025 –

 

Moreover, many exemptions and deductions not allowed under the new tax regime are allowed in the old tax regime. A few of the popular exemptions and deductions that are a part of the old tax regime but not the new one are:

Tax saving investments under chapter VI-A (80C, 80CCC,80D, 80DD,80E,80DDB,80EE,80EEA,80G,80GGA,80GG,80GGC, etc.). For eg.: life insurance premiums

• Leave travel allowance
• House rent allowance
• Deductions under Section 80TTA/TTB
• Entertainment allowance
• Interest on housing loan
• Donations to universities and educational institutes, etc.

 

Key Takeaways

1. The new tax regime is applicable by default; however, taxpayers can opt out of the new tax regime if the old tax regime is more beneficial. 
2. Income up to Rs 12 lakhs under the new tax regime is tax-free due to an increased rebate of Rs. 60,000 in the Union Budget 2025.
3. The rebate amount of Rs. 60,000 under the new tax regime is not applicable for special tax incomes.
4. No changes have been made in the Union Budget 2025 in deductions available under the new tax regime.

 

Conclusion

Both tax systems come with benefits. The old tax regime inculcates more saving habits in you, and the new tax regime simplifies the tax process and is easy to understand. Choosing the tax regime should be based on your income tax slab, and you can use an income tax calculator to know which regime works better for you. Pay taxes on time and be a responsible citizen.

 

FAQs

 

1. Do I need to file Income Tax Return (ITR) if my annual income is below Rs.2.5 lakh?

You don’t have to file ITR if your annual income is below Rs.2.5 lakhs. However, if any TDS has been deducted from your income and you want to claim the TDS refund, you will have to file the ITR for the same.

 

2. Can you claim the standard deduction on a salary of Rs. 50,000 under the new tax regime?

Yes, standard deduction is allowed on salary income. It was introduced in the new tax regime by the Union Budget 2023 at Rs. 50,000 and later was increased to Rs. 75,000 in the Budget 2024³.

 

3. Who can claim a rebate under Section 87A?

Individuals and HUFs whose taxable income is up to Rs 5 lakhs in the old tax regime and Rs 12 lakhs for the Financial Year 2025-26 in the new tax regime can claim a rebate under Section 87A.

 

4. Are the income tax slab rates under the new tax regime the same for individuals and senior citizens?

Yes, under the new tax regime, the tax slabs are uniform for individuals and senior citizens⁶.

 

5. What are the Income Tax Slabs for NRI?

Under the old tax regime, NRIs are taxed at the same rate as resident individuals aged below 60 years.

 

6. What are the Income Tax Slabs for Women?

Income tax slabs for men and women are the same.

 

7. Is filing income tax returns compulsory?

Filing income tax returns is mandatory² for all types of taxpayers if their income crosses the basic exemption limits, they have income from capital gains, business income, foreign assets, or want to claim refunds. Otherwise, it’s optional but is recommended for financial records.

 

8. What are the income tax slabs under the new tax regime for FY 2025-26?

The income tax slabs under the new tax regime for FY 2025-26¹ were introduced in the Budget 2023, and stated as follows:

Source:

1. https://cleartax.in/s/income-tax-slabs
2. https://cleartax.in/s/what-is-itr
3. https://cleartax.in/s/new-tax-regime-frequently-asked-questions
4. https://npstrust.org.in/benefits-of-nps#:~:text=Eligible%20for%20tax%20deduction%20up,provided%20under%20section%2080%20CCE
5. https://cleartax.in/s/income-tax-slab-for-senior-citizen
6. https://cleartax.in/s/section-80jja-income-tax-act
7. https://www.indiafilings.com/learn/new-tax-regime-recent-income-tax-changes-in-india/