Budget 2025, the revised income tax slabs under Section 115BAC the new regime for FY 2025-26 (AY 2026-27) are: Income up to Rs. 4 lakh is exempt, Rs. 4 lakh to 8 lakh taxed at 5%, Rs. 8lakh to 12 lakh at 10%, Rs. 12 lakh to 16 lakh at 15%, Rs. 16 lakh to 20 lakh at 20%, Rs. 20 lakh to 24 lakh at 25%, and income above Rs. 24 lakh at 30%. Additionally, the rebate under Section 87A has been increased to Rs. 60,000, making income up to Rs. 12 lakh effectively tax-free.
Income Tax Slabs for FY 2025-26 (AY 2026-27) Under the New Tax Regime
The income tax slab rates under the new tax regime for FY 2025-26 (AY 2026-27) are as follows:
| Income Tax Slabs for FY 2025-26 (AY 2026-27) | Income Tax Rates for FY 2025-26 (AY 2026-27) |
| Up to Rs. 4,00,000 | Nil |
| Rs. 4,00,001 to Rs. 8,00,000 | 5% |
| Rs. 8,00,001 to Rs. 12,00,000 | 10% |
| Rs. 12,00,001 to Rs. 16,00,000 | 15% |
| Rs. 16,00,001 to Rs. 20,00,000 | 20% |
| Rs. 20,00,001 to Rs. 24,00,000 | 25% |
| Above Rs. 24,00,000 | 30% |
Rebate under Section 87A is available for income up to Rs. 12 lakh, meaning taxpayers with total income not exceeding Rs. 12 lakh have zero tax liability.
Example – FY 2025-26 (AY 2026-27)
Let’s say Mr. A had an income of Rs. 10 lakh for FY 2025-26 (AY 2026-27). His tax liability will be computed as follows:
| Income Tax Slabs for FY 2025-26 (AY 2026-27) | Income Tax Rates for FY 2025-26 (AY 2026-27) | Tax Liability |
| Up to Rs. 4,00,000 | Nil | 0 |
| Rs. 4,00,001 to Rs. 8,00,000 | Rs. 4,00,000 at 5% | 20,000 |
| Rs. 8,00,001 to Rs. 9,25,000 | Rs. 1,25,000 at 10% | 12,500 |
| 32,500 | ||
| Add: Cess at 4% | 1,300 | |
| Total Tax Liability | 33,800 | |
| Rebate u/s 87A | (33,800) | |
| Final Tax Liability | 0 |
A standard deduction of Rs. 75,000 is available to Mr. A, thus making his taxable income Rs. 9,25,000. As the rebate u/s 87A is available for income less than Rs. 12 lakh, Mr. A can enjoy this benefit and pay Zero tax.
Let’s say Mr. A’s income for FY 2025-26 (AY 2026-25) remained at Rs. 9 lakh. He would still pay Zero Tax as his income is eligible for rebate.
Income Tax Slabs for FY 2024-25 (AY 2025-26) Under the New Tax Regime
The existing new tax regime slabs for FY 2024-25 (AY 2025-26) are as follows:
| Income Tax Slabs for FY 2024-25 (AY 2025-26) | Income Tax Rates for FY 2024-25 (AY 2025-26) |
| Up to Rs. 3,00,000 | Nil |
| Rs. 3,00,001 to Rs. 7,00,000 | 5% |
| Rs. 7,00,001 to Rs. 10,00,000 | 10% |
| Rs. 10,00,001 to Rs. 12,00,000 | 15% |
| Rs. 12,00,001 to Rs. 15,00,000 | 20% |
| Above Rs. 15,00,000 | 30% |
Rebate under Section 87A is available for income up to Rs. 7 lakh, meaning taxpayers with total income not exceeding Rs. 7 lakh have zero tax liability.
Example – FY 2024-25 (AY 2025-26)
Mr. A had an income of Rs. 9 lakh for FY 2024-25 (AY 2025-26). His tax liability will be computed as follows:
| Income Tax Slabs for FY 2024-25 (AY 2025-26) | Income Tax Rates for FY 2024-25 (AY 2025-26) | Tax Liability |
| Up to Rs. 3,00,000 | Nil | 0 |
| Rs. 3,00,001 to Rs. 7,00,000 | 5% | 20,000 |
| Rs. 7,00,001 to Rs. 8,25,000 | 10% | 12,500 |
| 32,500 | ||
| Add: Cess at 4% | 1,300 | |
| Total Tax Liability | 33,800 |
A standard deduction of Rs. 75,000 will be available to Mr. A, after which his taxable income will be Rs. 8,25,000. The final tax liability of Mr. A will be Rs. 33,800 after a standard deduction of Rs. 75,000.
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Tax Comparison Under New Tax Regime for FY 2025-26 and FY 2024-25
Mr. A with an income of Rs. 10 lakh in FY 2025-26 (AY 2026-27), had Zero tax liability. This was due to the rebate. If he had opted for the Old Tax Regime, he would pay Rs. 1,06,600 in taxes. By opting for the New Tax Regime, Mr. A will now save Rs. 1,06,600 in taxes.
Similarly, for FY 2024-25 (AY 2025-26) if Mr. A had an income of Rs. 10 lakh, he would pay Rs. 44,200 as tax even under the new tax regime. This is due to the rebate allowed only on income not exceeding Rs. 7 lakh. However, with an increased rebate limit in FY 2025-26 (AY 2026-27), Mr. A has no tax liability at all on his Rs. 10 lakh income.
The Income Tax Slabs and Rates comparison for FY 2024-25 and FY 2025-26 under the New Tax Regime
Where the basic exemption limit under the new tax regime for FY 2024-25 is Rs. 3 lakhs, for FY 2025-26, the basic exemption limit has been increased to Rs 4 lakhs. The below table gives a comparison between the Income Tax Slabs and Rates for FY 2024-25 and FY 2025-26.
| Income Tax Slabs | Income Tax Rates FY 2024-25 (AY 2025-26) | Income Tax Rates FY 2025-26 (AY 2026-27) |
| Up to Rs. 4 lakhs | Nil | Nil |
| Rs. 4 lakhs to Rs. 7 lakhs | 5% | 5% |
| Rs. 7 lakhs to Rs. 8 lakhs | 10% | 5% |
| Rs. 8 lakhs to Rs. 10 lakhs | 10% | 10% |
| Rs. 10 lakhs to Rs. 12 lakhs | 15% | 10% |
| Rs. 12 lakhs to Rs. 15 lakhs | 20% | 15% |
| Rs. 15 lakhs to Rs. 16 lakhs | 30% | 15% |
| Rs. 16 lakhs to Rs. 20 lakhs | 30% | 20% |
| Rs. 20 lakhs to Rs. 24 lakhs | 30% | 25% |
| Above Rs. 24 lakhs | 30% | 30% |
Deductions Allowed Under New Tax Regime
Though most of the popular deductions and exemptions such as HRA, 80C, 80D, and many are not allowed under the new tax regime, the following are made available to the taxpayers:
- Standard deduction of Rs. 75,000
- Employer’s contribution to NPS under Section 80CCD(2)
- Deduction for Agniveer Corpus Fund (Section 80CCH)
- Transport allowance for disabled employees
- Gratuity, Leave encashment, VRS exemption (on retirement)
So, while most new tax regime deductions are not available, partial tax saving is still possible.
Income Tax Slabs for FY 2024-25 (AY 2025-26) & FY 2025-26 (AY 2026-27) Under Old Tax Regime
The income tax slab under the old tax regime has not changed. Though the new tax regime slab may look liberal, the old tax regime might still end up beneficial for a few taxpayers. The income tax slabs under the old tax regime for FY 2025-26 (AY 2026-27) are as follows:
| Income Tax Slabs | Income Tax Rates |
| Up to Rs. 2,50,000 | Nil |
| Rs. 2,50,001 to Rs. 5,00,000 | 5% |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
Popular Deductions Allowed under Old Tax Regime
- 80C, 80D, 80G, 80TTA
- HRA, LTA, home loan interest (Section 24)
- Education loan interest (Section 80E), etc.
Income Tax Slabs for Senior Citizens
The income tax slabs for senior citizens aged above 60 years but below 80 years under the old tax regime is as follows:
| Income Tax Slabs | Income Tax Rates |
| Up to Rs. 3,00,000 | Nil |
| Rs. 3,00,001 to Rs. 5,00,000 | 5% |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
For super senior citizens aged above 80 years, the basic exemption limit increases to ₹5,00,000.
Note: There is no separate slab benefit for senior citizens under the new tax regime.
What is a Surcharge and Applicable Surcharge Rates?
A surcharge is an additional tax calculated as a percentage of the income tax payable by a taxpayer. It applies mainly to high-income individuals, HUFs, and firms whose income exceeds specified thresholds. However, taxpayers who marginally cross these limits can claim marginal relief, ensuring the additional tax (surcharge) does not exceed the income that surpasses the threshold.
Surcharge rate for individuals under the Old and New Tax Regime is as follows:
| Net Taxable Income limit | Old Tax Regime | New Tax Regime |
| Less than Rs 50 lakhs | Nil | Nil |
| More than Rs 50 lakhs ≤ Rs 1 Crore | 10% | 10% |
| More than Rs 1 Crore ≤ Rs 2 Crore | 15% | 15% |
| More than Rs 2 Crore ≤ Rs 5 Crore | 25% | 25% |
| More than Rs 5 Crore | 37% | 25% |
Surcharge Rates on Capital Gains, Dividends, and AOPs
The surcharge rates of 25% or 37% do not apply to income from:
- Dividends
- Short-term capital gains under Section 111A (STCG on shares)
- Long-term capital gains under Section 112A (LTCG on shares)
- Income of Foreign Institutional Investors under Section 115AD
Maximum surcharge on such incomes is capped at 15%. For an Association of Persons (AOP) consisting entirely of companies, the surcharge rate is also limited to 15%.
Additionally, a Health and Education cess of 4% is levied on the total income tax and surcharge amount payable.
New Tax Regime vs Old Regime – Which Tax Regime Is Better?
The new tax regime benefits taxpayers with income up to Rs 24 lakh who have few or no deductions, as it offers lower tax rates without exemptions. However, the old regime is better for high-income earners and those claiming large deductions like 80C investments, home loan interest, or insurance premiums.
- Choose the new regime if you invest less in tax-saving schemes and your income is less than Rs. 12 lakh.
- Choose the old regime if you have significant deductions to reduce taxable income.
It’s best to compare both old vs new tax regimes to see which offers lower tax based on your income and deductions. Use ClearTax Income Tax Calculator to understand which regime is best for you.
What are the Deductions Available Under New and Old Tax Regime
Under the old tax regime, taxpayers can claim popular deductions such as Section 80C (investments up to Rs. 1.5 lakh), HRA, LTA, 80D (health insurance premiums), and interest on housing loans.
In contrast, the new tax regime offers lower tax rates but restricts most deductions, allowing only a few such as employer’s NPS contribution under Section 80CCD(2), Contributions towards agniveer corpus fund, family pension, home loan interest deduction against let-out property and deductions under Section 80JJA for businesses.
Standard Deduction Under New and Old Tax Regime
Under the old tax regime, salaried taxpayers can claim a standard deduction of Rs. 50,000 from their salary income. In comparison, the new tax regime allows a higher standard deduction of Rs. 75,000, providing additional tax relief to salaried individuals opting for the new regime.
Rebate u/s 87A Under New and Old Tax Regime
Under the old tax regime, taxpayers with taxable income up to Rs. 5 lakh get a rebate under Section 87A, resulting in zero tax liability. Under the new tax regime, for FY 2024-25, taxpayers with income up to Rs. 7 lakh pay no tax. From FY 2025-26, the rebate limit has been increased to Rs. 12 lakh, making income up to Rs. 12 lakh completely tax-free under the new regime.
Income Tax Savings Comparison Examples – Old and New Tax Regime
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 2024-25 (AY 2025-26), his tax liability was as follows:
- New Tax Regime: Rs. 71,500
- Old Tax Regime: Rs. 1,10,760
As the tax liability under the new tax regime was less, Mr. Ramu filed his ITR under the new tax regime and saved Rs. 39,260 in taxes. However, for FY 2025-26, Mr. Ramu will have zero tax liability as his income is less than Rs. 12 lakh and is eligible for rebate u/s 87A.
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.
Therefore, the new tax regime might not be beneficial for all taxpayers. For taxpayers having high deductions and exemptions, the old tax regime still proves to be beneficial. The new tax regime is apt for those taxpayers with less or no deductions to claims.
Salary-wise Tax Calculation and Savings
Income tax payable for different salary levels for FY 2024-25 (AY 2026-27) with savings is given in the below table for both new and old tax regime:
| Salary Income | FY 2024-25 (AY 2025-26) | ||
| Old Tax Regime | New Tax Regime | Tax Savings | |
| Rs. 5 lakh | 0 (Rebate u/s 87A) | 0 (Rebate u/s 87A) | Nil |
| Rs. 7 lakh | Rs. 44,200 | 0 (Rebate u/s 87A) | Rs. 44,200 |
| Rs. 10 lakh | Rs. 1,06,600 | Rs. 44,200 | Rs. 62,400 |
| Rs. 12 lakh | Rs. 1,63,800 | Rs. 71,500 | Rs. 92,300 |
| Rs. 15 lakh | Rs. 2,57,400 | Rs. 1,30,000 | Rs. 1,27,400 |
| Rs. 18 lakh | Rs. 3,51,000 | Rs. 2,15,800 | Rs. 1,35,200 |
| Rs. 20 lakh | Rs. 4,13,400 | Rs. 2,78,200 | Rs. 1,35,200 |
| Rs. 24 lakh | Rs. 5,38,200 | Rs. 4,03,000 | Rs. 1,35,200 |
| Rs. 26 lakh | Rs. 6,00,600 | Rs. 4,65,400 | Rs. 1,35,200 |
Income tax payable for different salary levels for FY 2025-26 (AY 2026-27) with savings is given in the below table for both new and old tax regime:
| Salary Income | FY 2025-26 (AY 2026-27) | ||
| Old Tax Regime | New Tax Regime | Tax Savings | |
| Rs. 5 lakh | 0 (Rebate u/s 87A) | 0 (Rebate u/s 87A) | Nil |
| Rs. 7 lakh | Rs. 44,200 | 0 (Rebate u/s 87A) | Rs. 44,200 |
| Rs. 10 lakh | Rs. 1,06,600 | 0 (Rebate u/s 87A) | Rs. 1,06,600 |
| Rs. 12 lakh | Rs. 1,63,800 | 0 (Rebate u/s 87A) | Rs. 1,63,800 |
| Rs. 15 lakh | Rs. 2,57,400 | Rs. 97,500 | Rs. 1,59,900 |
| Rs. 18 lakh | Rs. 3,51,000 | Rs. 1,05,800 | Rs. 2,00,200 |
| Rs. 20 lakh | Rs. 4,13,400 | Rs. 1,92,400 | Rs. 2,21,000 |
| Rs. 24 lakh | Rs. 5,38,200 | Rs. 2,92,500 | Rs. 2,45,700 |
| Rs. 26 lakh | Rs. 6,00,600 | Rs. 3,51,000 | Rs. 2,49,600 |
Note: The above calculations are done without considering any deductions and exemptions except, standard deduction of Rs. 50,000 under the old tax regime and Rs. 75,000 under the new tax regime.
The new tax regime proves more beneficial for taxpayers when they have less or no deductions to claim. However, with a revision in the new regime tax slabs and increased rebate for FY 2025-26, taxpayers will be able to save more in taxes compared to their savings in FY 2024-25.
The old tax regime might still be beneficial to taxpayers with a lot of deductions to claim and with high income.
Budget 2025 Changes
The following important changes were made in Budget 2025:
- Zero Tax Up to ₹12 Lakh: Under the new tax regime, income up to ₹12 lakh is now fully exempt due to enhanced rebate under Section 87A. The total tax rebate available is Rs. 60,000 from the previous Rs. 25,000 available till FY 2024-25.
- Revised Tax Slabs: The new regime slabs have been adjusted, making income up to Rs. 4 lakh exempt from tax. The revised income tax slabs for FY 2025-26 (AY 2026-27) are as follows: Income up to Rs. 4 lakh is exempt, Rs. 4–8 lakh taxed at 5%, Rs. 8–12 lakh at 10%, Rs. 12–16 lakh at 15%, Rs. 16–20 lakh at 20%, Rs. 20–24 lakh at 25%, and income above Rs. 24 lakh at 30%.
- TDS/TCS Rationalisation: TDS threshold on senior citizen interest doubled to ₹1 lakh; TDS on rent capped at ₹6 lakh annually.
- Extended Return Revision Period: Time for ITR-U i.e., Updated Return has been extended from 2 years to 4 years.
The revised income tax slabs for FY 2025-26 (AY 2026-25) offer more clarity and simplicity under the new tax regime, focusing on increasing savings among taxpayers and reducing their tax burden. Although most deductions and exemptions are disallowed, a few are available through which taxpayers can save taxes. However, the old regime may still be beneficial for those with higher income and large deductions. Evaluate your income and investment pattern before choosing.
Frequently Asked Questions
What is e-verification of Income tax returns? How to do it?
The income tax return needs to be verified post submission. It is applicable for all types of return original, belated, revised or updated return. It is mandatory to do verify the return within 30 days from the date of filing. Failure to verify the return will be deemed that you have not filed the return at all. One can do the verification either by physically by appending the signature on the ITR acknowledgement form (ITR V) manually and sending it to CPC, Bengaluru by courier or post OR electronically via Aadhaar OTP or EVC (electronic verification code) or Digital signature during or after the submission of Income tax return.
Is HRA exemption available in new tax regime?
No, HRA exemption u/s10(13A) is not allowed in new tax regime.
How to choose the tax regimes while filing?
For 2024-25 – default regime is new tax regime
If the total income does not include profit and gains from business & profession and new old regime needs to be opted, then one must file Form 10IEA (online form from Income Tax portal) before the submission of income tax return by clicking Yes for “Do you opt out from sec 115BAC(1A)?”, else one must file income tax return only without the requirement to file Form 10IEA. In both the scenarios return must be submitted within the due date.
Is income up to 12 lakhs tax-free for FY 2025-26?
Yes, if your income is up to ₹ 12,00,000 in the FY 2025-26 you will have zero tax liability. For an income upto ₹4,00,000, the income earned is taxed under NIL rate. But, a rebate of ₹60,000 is allowed for an income earned up-to ₹12,00,000 because of which, the tax liability comes to NIL for an income upto ₹12,00,000.
Which tax regime is the default?
The new tax regime is the default regime for the FY 2024-25.
Which ITR form should I use based on income slabs?
The ITR forms are not based on your tax slabs. They are based on the different sources of income and the income level. You can click here to learn about which ITR to file.
