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

Introduction

As we enter the financial year 2025-26, the tax regime in India has undergone significant updates. The government simplified the structure of income-tax slabs under the “new tax regime”, making tax calculation easier and, for many, reducing their tax burden. Whether you are a salaried employee, pensioner, or professional, understanding the revised slabs, rebates, and how they compare to the “old regime” can help you plan your finances better. In this guide, we explain what the new slab rates are, who they apply to, how the old regime works, when it makes sense to pick one over the other, and how to estimate your tax liability, all in plain, easy-to-understand language.

What’s New: Income Tax Slabs for FY 2025-26 / AY 2026-27 (New Tax Regime)

Following the Budget 2025, the government revised the income-tax slabs under the “new tax regime” with effect from 1 April 2025. The updated slab rates are:

Taxable Income (₹ per year)

Tax Rate

Up to ₹ 4,00,000

Nil

₹ 4,00,001 – ₹ 8,00,000

5%

₹ 8,00,001 – ₹ 12,00,000

10%

₹ 12,00,001 – ₹ 16,00,000

15%

₹ 16,00,001 – ₹ 20,00,000

20%

₹ 20,00,001 – ₹ 24,00,000

25%

Above ₹ 24,00,000

30%

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What’s the benefit?

• Thanks to a higher rebate (under section 87A) and standard deduction for salaried & pensioners, now many individuals earning up to ₹12 lakh per year end up paying zero tax under the new regime.
• For a salaried or pensioned taxpayer, after a standard deduction of ₹ 75,000, even slightly higher gross incomes may result in zero or minimal tax, depending on other income components.
• The slab structure is simplified, and there is no differentiation on the basis of age (i.e., same slabs for senior / super-senior citizens under the new regime), reducing complexity.

The “Old Tax Regime” still exists - Here’s what it looks like

If you prefer to keep claiming deductions (like investments under section 80C, health insurance premiums under 80D, home-loan interest, HRA, etc.), you can still opt for the “old tax regime.” The old slabs (unchanged for FY 2025-26) are:

For individuals below 60 years (including NRIs, HUFs):

• Up to ₹ 2,50,000 - Nil
• ₹ 2,50,001 – ₹ 5,00,000 - 5%
• ₹ 5,00,001 – ₹ 10,00,000 - 20%
• Above ₹ 10,00,000 - 30%

For senior citizens (60–79 years) and super-senior (80+), there are higher basic exemption limits, but the slab structure is similar (i.e. Nil up to ₹ 3,00,000 or ₹ 5,00,000 depending on age).

With the old regime, you can continue to claim various deductions and exemptions, which can make sense if you have substantial eligible investments or expenses.

What’s the difference between old and new regimes - which is better for you?

Here’s a comparison highlighting key differences, which helps in choosing the right regime based on your income and financial profile:

Feature / Factor

New Tax Regime (FY 2025-26)

Old Tax Regime

Slab structure

Simplified, 7 slabs up to ₹24 L then 30%

Traditional, 4 slabs (upto 2.5L, 5L, 10L, above)

Basic exemption threshold

₹ 4 lakh (i.e., no tax up to ₹ 4 L)

₹ 2.5 lakh (or higher for senior citizens)

Benefit of rebate & deductions

Standard deduction for salaried ₹ 75,000 + rebate under 87A → effective tax-free up to  ₹ 12 lakh income

Full deductibility of many exemptions & deductions (80C, 80D, HRA, home loan interest, etc.)

For whom it suits

Those who don’t have many deductions, a salaried, simple income, want simplicity

Taxpayers with high deductions (investments, insurances, home loan, etc.)

Age-based relaxations

None, same slabs for all ages

Senior / super-senior get wider exemption limits under the old regime

Flexibility

You can choose annually (for salary/pension) which regime to use

Useful if you want to continue benefiting from deductions/exemptions

Bottom line: If you have few or no deductions, or want a simple tax calculation and don’t mind giving up exemptions, the new regime may be better, especially if your gross income is modest (up to ₹ 12 L). If you have substantial investments, home-loan interest, insurance, or other deductible expenses, the old regime might save more tax, but calculations must be done carefully.

How to Estimate Your Tax for FY 2025-26

Here’s an easy method to estimate tax under the new regime (ideal for salaried / pensioned individuals):

1. Calculate your gross income: Salary, interest, other income (excluding capital-gains taxed differently), as per 1 April 2025 - 31 March 2026.

2. Deduct standard deduction (if salaried/pension): ₹ 75,000. Remaining amount = taxable income.

3. Apply slab rates (new regime):

   1. First ₹ 4 L → Nil
   2. Next ₹ 4 L (₹4–8 L) → 5%
   3. Next ₹ 4 L (₹8–12 L) → 10%
   4. And so on … up to > ₹ 24 L → 30% on amount above ₹ 24 L.

4. Check for rebate under section 87A & marginal relief: If taxable income (after standard deduction) ≤ ₹ 12 L, tax may be zero. Many taxpayers pay no tax.

5. Add cess & surcharge (if applicable): 4% cess on tax, plus surcharge if income above certain thresholds (if applicable).

6. Compare with the old regime (after applying deductions), choose whichever yields lower tax.

Example: Salary ₹ 10 L / year (employee)

• Gross salary: ₹ 10,00,000
• Standard deduction: ₹ 75,000
• Taxable income = ₹ 9,25,000

Under new regime:

• Up to ₹ 4 L ⇒ Nil
• ₹ 4–8 L ⇒ 5% on ₹ 4 L = ₹ 20,000
• Remaining ₹ 1,25,000 ⇒ 10% = ₹ 12,500
• Total tax = ₹ 32,500 + 4% cess = ₹ 33,800 approx

If you had deductions (e.g., 80C, 80D, home loan interest), the old regime calculation might give lower tax, so you should compute both and pick.

Who should prefer new regime vs who should stick to old regime

The new regime is better for you if:

• You have few or no tax-saving investments
• You want a simple, predictable tax calculation
• Your gross income is not very high (especially ≤ ₹ 12 L)
• You don’t benefit much from old-regime exemptions/deductions

Old Regime may be better if:

• You have home loan interest, rent paid (HRA), insurance premiums, investments under 80C/80D/other sections, i.e., substantial deductions
• You are a senior or super-senior citizen looking to utilize a higher basic exemption limit and deductions
• Your income is high, and you want to reduce your taxable income using deductions

Important Things to Know / Recent Changes for FY 2025-26

• From 1 April 2025, the basic exemption under the new regime has increased up to ₹ 4 L, which is now tax-free.
• The rebate under section 87A has also been enhanced, making income up to ₹ 12 L effectively tax-free under new regime (subject to standard deduction, etc.) for eligible taxpayers.
• Even with changes, the old regime continues to be valid; taxpayers can pick whichever suits them (mostly at the time of ITR filing).
• There is no separate lower slab for seniors - under the new regime, slabs are the same irrespective of age.
• For incomes taxed at special rates (capital gains, lottery winnings, etc.), the rebate or slab relief may not apply in the same way.

Summary

• The new tax slabs for FY 2025-26 simplify tax calculation and likely reduce tax for many, especially middle-income earners who don’t have many deductions.
• With up to ₹ 12 lakh effective tax-free income under the new regime (after standard deduction and rebates), many salaried or pensioned taxpayers may end up with zero tax liability.
• However, if you have investments, a home loan, insurance premiums, or other deductible expenses, you should compare both regimes to see which is better for you.
• It’s important to calculate both ways (old and new) before filing ITR. The “better” regime may change year to year depending on your income and deductions.
• Keep in mind that some income (capital gains, special income, etc.) might be taxed differently, and slab relief may not apply uniformly.