Income Tax in India — FY 2025-26 Complete Guide
The Union Budget 2025, presented on February 1, 2025, brought significant changes to the income tax structure — particularly for the New Tax Regime. Understanding these changes helps you choose the right regime and plan your taxes more effectively for the financial year 2025-26 (Assessment Year 2026-27).
New Tax Regime Slabs — FY 2025-26 (Budget 2025)
The New Tax Regime has been made the default regime and received revised slabs with Budget 2025:
| Income Slab | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Standard Deduction: ₹75,000 for salaried employees and pensioners (up from ₹50,000).
Rebate u/s 87A: Full tax rebate up to ₹60,000 if taxable income ≤ ₹12,00,000. This means salaried individuals with income up to ₹12.75 lakh pay zero tax under the new regime.
Old Tax Regime Slabs — FY 2025-26
The Old Tax Regime slabs remain unchanged:
| Income Slab | Below 60 | Senior (60–79) | Super Senior (80+) |
|---|---|---|---|
| Up to ₹2,50,000 | Nil | — | — |
| Up to ₹3,00,000 | — | Nil | — |
| Up to ₹5,00,000 | — | — | Nil |
| ₹2.5L–₹5L / ₹3L–₹5L | 5% | 5% | — |
| ₹5,00,001 to ₹10,00,000 | 20% | 20% | 20% |
| Above ₹10,00,000 | 30% | 30% | 30% |
Standard Deduction: ₹50,000 for salaried employees.
Rebate u/s 87A: ₹12,500 if taxable income ≤ ₹5,00,000 (effectively zero tax up to ₹5 lakh after rebate).
Key Deductions Available Only in Old Regime
- Section 80C — PF, PPF, ELSS, LIC premium, NSC, home loan principal, tuition fees (max ₹1,50,000)
- Section 80CCD(1B) — NPS contribution over and above 80C (additional ₹50,000)
- Section 80D — Health insurance: ₹25,000 for self/spouse/kids, ₹25,000 more for parents (₹50,000 if parents are senior citizens)
- Section 24(b) — Home loan interest: up to ₹2,00,000 for self-occupied property
- HRA Exemption — Under Section 10(13A)
- LTA — Leave Travel Allowance (twice in a block of 4 years)
- Section 80TTA — Savings account interest up to ₹10,000
The New Tax Regime does not allow any of these deductions (except standard deduction and NPS employer contribution under 80CCD(2)).
Which Regime Should You Choose?
The break-even point depends on your income level and total deductions:
- If your total Old Regime deductions are low (below ₹3–4 lakh), the New Regime is almost certainly better.
- If you have maximized 80C + 80D + home loan + HRA, the Old Regime can still save more at higher income brackets.
- For income up to ₹7.5 lakh with standard deduction, New Regime results in zero or minimal tax — usually the clear winner.
- For income above ₹15 lakh with high deductions, use this calculator to compare — the Old Regime may save ₹10,000–₹50,000+ depending on deductions claimed.
Surcharge and Health & Education Cess
A 4% Health and Education Cess applies on the total tax payable (including surcharge). For high incomes, a surcharge also applies:
- ₹50 lakh to ₹1 crore: 10% surcharge
- ₹1 crore to ₹2 crore: 15% surcharge
- ₹2 crore to ₹5 crore: 25% surcharge (Old) / 25% (New)
- Above ₹5 crore: 37% surcharge (Old) — capped at 25% in New Regime