New Tax Regime comparison FY 2025-26 vs 2024-25: How net tax saving increases from ₹13 lakh to ₹24 lakh income
The Finance Bill 2025 has proposed to revise the tax slabs and rebate under the new tax regime to make income up to ₹12 lakh tax-free from FY 2025-26.
Under the proposed slabs in the new tax regime, the basic exemption limit will go up from ₹3 lakh to ₹4 lakh while the rebate under section 87A will increase to ₹60,000. Income-tax rates have also been proposed to be revised for different slabs ( Rebate under section 87 A
In Budget 2023-24, the Government introduced the income tax rebate in the new tax regime, allowing resident individuals with total income up to ₹7 lakh to pay zero tax. In the Budget 2025-26, it has been proposed to increase the rebate so that individual taxpayers do not pay tax if their total income is up to ₹12 lakh (other than the special rate income).
With the proposed change in Budget 2025, around one crore taxpayers, who were earlier required to pay tax varying from ₹20,000 to ₹80,000 will be now paying ‘Nil’ tax, according to the Ministery of Finance.
The tax-free income limit will be ₹12.75 lakh for salaried tax payers, due to standard deduction of ₹75,000.
Marginal relief as provided earlier under the new tax regime is also applicable for income marginally higher than ₹12 lakh.
Reduction in tax rates
There has been a continuous decrease in the personal income tax rates in various income slabs since the introduction of new tax regime. In Budget 2025-26, it has been proposed that the higher tax rate at 30% will be applicable to income above ₹24 lakh.
New tax regime rates and slabs in FY 2020-21
| Taxable income slab (₹)Tax rates under new regime | |
|---|---|
| Upto 2,50,000 | Nil |
| From 2,50,001 to 5,00,000 | 5% |
| From 5,00,001 to 7,50,000 | 10% |
| From 7,50,001 to 10,00,000 | 15% |
| From 10,00,001 to 12,50,000 | 20% |
| From 12,50,001 to 15,00,000 | 25% |
| Above 15,00,000 | 30% |
New tax regime rates and slabs in FY 2023-24
| Taxable income slab (₹) | Tax rates under new regime |
|---|---|
| Upto 3,00,000 | Nil |
| From 3,00,001 to 6,00,000 | 5% |
| From 6,00,001 to 9,00,000 | 10% |
| From 9,00,001 to 12,00,000 | 15% |
| From 12,00,001 to 15,00,000 | 20% |
| Above 15,00,000 | 30% |
New tax regime rates and slabs in FY 2024-25
| Taxable income slab (₹) | Tax rates under new regime |
|---|---|
| Upto 3,00,000 | Nil |
| From 3,00,001 to 7,00,000 | 5% |
| From 7,00,001 to 10,00,000 | 10% |
| From 10,00,001 to 12,00,000 | 15% |
| From 12,00,001 to 15,00,000 | 20% |
| Above 15,00,000 | 30% |
New tax regime rates and slabs in FY 2025-26
| Taxable income slab (₹) | Tax rates under new regime |
|---|---|
| Upto 4,00,000 | Nil |
| From 4,00,001 to 8,00,000 | 5% |
| From 8,00,001 to 12,00,000 | 10% |
| From 12,00,001 to 16,00,000 | 15% |
| From 16,00,001 to 20,00,000 | 20% |
| From 20,00,001 to 24,00,000 | 25% |
| Above 24,00,000 | 30% |
Increase in standard deduction limit
In the Budget 2023-24, the standard deduction of ₹50,000 was allowed to the salaried persons opting for new tax regime. This limit was increased to ₹75,000 in the Budget 2024-25 (July,2024). Similarly, deduction on family pension for pensioners was enhanced from ₹15,000 to ₹25,000 in the Budget 2024-25 (July,2024).
The government says that increased standard deduction limit in new regime provided relief to about four crore salaried individuals and pensioners.
Exemptions under new tax regime
Taxpayers opting for New Tax regime can also avail benefit of certain exemptions such as leave encashment up to ₹25 lakh, increased deduction of employers contribution under NPS, some allowances received by salaried persons like daily allowance, conveyance allowance etc. and gratuity amount.
Option of tax regimes
The new income tax regime became the default tax regime in Budget 2023-24. However, taxpayers have the option to avail the benefit of the old tax regime. Under the old regime, Individual/ HUF taxpayers can claim exemptions/deductions and have a wide range of tax preferences available to them. )
According to the finance bill, the tax rebate of ₹60,000 will apply to income up to ₹12 lakh. However, this rebate will be available only for normal incomes such as salary, pension, bank deposits, etc. It won’t apply to special rate incomes such as capital gains from equity shares or mutual funds.
How much tax can you save
Since the announcement of the finance bill provisions in the recent budget, many taxpayers have been curious about the total tax savings they may achieve due to the proposed changes in the new tax regime for the next financial year, starting April 1, 2025.
The income-tax calculator shows that net tax saving due to the proposed changes increases from ₹26,000 to ₹1.14 lakh as the income level goes up from ₹13 lakh to ₹24 lakh. However, the maximum tax saving on income above ₹24 lakh is ₹1.14 lakh only.
Taxpayers can easily compute their net tax savings due to the proposed changes by using this tax calculator.
Meanwhile, the following table will give you an overview of the net tax savings:
Tax-saving on income from ₹12 lakh to ₹24 lakh
Taxpayers can easily compute their net tax savings due to the proposed changes by using this tax calculator.
Meanwhile, the following table will give you an overview of the net tax savings:
Tax-saving on income from ₹12 lakh to ₹24 lakh
| Taxable income*Tax for FY 2024-25** (₹)Tax for FY 2025-26** (₹)Net tax savings in FY 2025-26 (₹) | |||
|---|---|---|---|
| ₹12 lakh | 83,200 | 0 | 83,200 |
| ₹13 lakh | 1,04,000 | 78,000 | 26,000 |
| ₹14 lakh | 1,24,800 | 93,600 | 31,200 |
| ₹15 lakh | 1,45,600 | 1,09,200 | 36,400 |
| ₹16 lakh | 1,76,800 | 1,24,800 | 52,000 |
| ₹17 lakh | 2,08,000 | 1,45,600 | 62,400 |
| ₹18 lakh | 2,39,200 | 1,66,400 | 72,800 |
| ₹19 lakh | 2,70,400 | 1,87,200 | 83,200 |
| ₹20 lakh | 3,01,600 | 2,08,000 | 93,600 |
| ₹21 lakh | 3,32,800 | 2,34,000 | 98,800 |
| ₹22 lakh | 3,64,000 | 2,60,000 | 1,04,000 |
| ₹23 lakh | 3,95,200 | 2,86,000 | 1,09,200 |
| ₹24 lakh | 4,26,400 | 3,12,000 | 1,14,400 |
| ₹25 lakh | 4,57,600 | 3,43,200 | 1,14,400 |
*Special rate incomes have not been included for calculation in this table.
**Tax includes health and education cess and surcharge
The Income-tax department also recently released a tool to help taxpayers compare tax savings under the new tax regime in FY 2025-26 vs FY 2024-25.
Please note that the above table gives a general idea of the net tax savings due to proposed changes in the new regime. For calculation, only taxable income has been considered. Net tax savings may vary in actual cases as specific rules of the Income-tax Act, 1961 will be required for calculating tax liability.