Disclaimer: * These changes are yet in law and are subject to change. Refer to official government sources and consult with a tax professional or email me for accurate and up-to-date information.*
Latest Income Tax Slab and Rates - FY 2025-26 (AY 2026-27) | FY 2024-25 (AY 2025-26)
The Finance Minister Nirmala Sitharaman has proposed changes to the income tax slabs under the New Tax Regime in the Union Budget 2025. These proposed changes, if enacted, would take effect from April 1, 2025, for the upcoming Financial Year 2025-26. The New Tax Regime continues to remain the default tax regime.
Proposed Income Tax Slabs Under the New Tax Regime for FY 2025-26 (AY 2026-27)
| Income Tax Slab (₹) | Income Tax Rate (%) |
|---|---|
| From 0 to 4,00,000 | 0 |
| 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 |
| From 24,00,001 and above | 30 |
The proposed new income tax slabs would allow taxpayers to save up to ₹1.14 lakh in a financial year.
Apart from income tax changes, the tax rebate under Section 87A has been proposed to be increased to ₹60,000. This increase would ensure zero tax payable on incomes up to ₹12 lakh. Current income tax laws allow zero tax on net taxable incomes up to ₹7 lakh, making them eligible for a tax rebate of up to ₹25,000.
The proposed new income tax slabs have also hiked the income tax basic exemption limit to ₹4 lakh from the current ₹3 lakh.
No changes have been proposed for deductions available under the New Tax Regime. For the upcoming fiscal year 2025-26, individuals will continue to claim a standard deduction of ₹75,000 from salary income and 14% of basic salary as employer's contribution to the NPS Tier-I account.
There is no change in the surcharge levied on the income tax liability under the New Tax Regime for FY 2025-26.
These proposed changes are intended to make the New Tax Regime more attractive, potentially leading more taxpayers to opt for it.
Old Tax Regime
No major changes have been announced in the Old Tax Regime. However, parents investing in NPS Vatsalya for their children may soon be eligible for a deduction under Section 80CCD (1b) of the Income Tax Act. This deduction would be available over and above the ₹1.5 lakh available under Section 80C, for additional investment made in NPS for up to ₹50,000. The tax rebate of ₹12,500 will continue to be available if taxable incomes do not exceed ₹5 lakh.
The main difference between the Old and New Tax Regimes remains the availability of deductions and exemptions. The New Tax Regime does not allow common deductions such as Section 80C (investments and expenditures up to ₹1.5 lakh), Section 80D (health insurance premium), and Section 80TTA (interest from savings accounts), among others.
The income tax slabs applicable under the Old Tax Regime depend on the age of the individual. The Old Tax Regime offers different basic income exemption limits based on the taxpayer's age.
Income Tax Slabs Under Old Tax Regime for Individuals Below 60 Years of Age
| Income Tax Slab (₹) | Income Tax Rate (%) |
|---|---|
| From 0 to 2,50,000 | 0 |
| From 2,50,001 to 5,00,000 | 5 |
| From 5,00,001 to 10,00,000 | 20 |
| From 10,00,001 and above | 30 |
Income Tax Slabs Under Old Tax Regime for Senior Citizens (60 to 80 Years)
| Income Tax Slab (₹) | Income Tax Rate (%) |
|---|---|
| From 0 to 3,00,000 | 0 |
| From 3,00,001 to 5,00,000 | 5 |
| From 5,00,001 to 10,00,000 | 20 |
| From 10,00,001 and above | 30 |
Income Tax Slabs Under Old Tax Regime for Super Senior Citizens (80 Years and Above)
| Income Tax Slab (₹) | Income Tax Rate (%) |
|---|---|
| From 0 to 5,00,000 | 0 |
| From 5,00,001 to 10,00,000 | 20 |
| From 10,00,001 and above | 30 |
An individual wanting to opt for the Old Tax Regime must specifically choose it while filing their income tax return.
Taxpayers without business income are required to choose between the two regimes every financial year. Those with business income wanting to continue with the Old Tax Regime must specifically opt for it. Once opted, they have a one-time option to switch to the New Tax Regime. However, once the New Tax Regime is chosen, they cannot revert to the Old Tax Regime.
Comparison of Income Tax Slabs: Old vs. New Tax Regime for FY 2024-25 (AY 2025-26)
| Taxable Income | Old Tax Regime | New Tax Regime |
|---|---|---|
| 0 to ₹2,50,000 | 0% | 0% |
| ₹2,50,001 to ₹3,00,000 | 5% | 0% |
| ₹3,00,001 to ₹5,00,000 | 5% | 5% |
| ₹5,00,001 to ₹7,00,000 | 20% | 5% |
| ₹7,00,001 to ₹10,00,000 | 20% | 10% |
| ₹10,00,001 to ₹12,00,000 | 30% | 15% |
| ₹12,00,001 to ₹15,00,000 | 30% | 20% |
| ₹15,00,001 and above | 30% | 30% |
How to Calculate Income Tax Payable Under the New Tax Regime
Salaried individuals continuing with the New Tax Regime for FY 2024-25 should know how to calculate their income tax payable. It's essential to remember that income tax slabs have been adjusted in the New Tax Regime.
For FY 2024-25, deductions available under the New Tax Regime for salaried individuals include:
- Standard deduction of ₹75,000 from salary and pension income.
- Section 80CCD (2) deduction for employer's contribution to the employee's NPS account (up to 14% of the basic salary).
Example:
Suppose an individual's gross total income is ₹20 lakh in FY 2024-25. They are eligible for a standard deduction of ₹75,000 and their employer has deposited ₹2 lakh in their Tier-I NPS account, making them eligible to claim a deduction under Section 80CCD (2) of the Income-tax Act.
Calculation:
Gross Total Income: ₹20,00,000
Standard Deduction: ₹(75,000)
Deduction under Section 80CCD (2): ₹(2,00,000)
Net Taxable Income: ₹17,25,000
Tax Calculation (New Tax Regime):
- Income up to ₹3 lakh: Exempt
- ₹3,00,001 to ₹7,00,000: (₹4,00,000 @ 5%) = ₹20,000
- ₹7,00,001 to ₹10,00,000: (₹3,00,000 @ 10%) = ₹30,000
- ₹10,00,001 to ₹12,00,000: (₹2,00,000 @ 15%) = ₹30,000
- ₹12,00,001 to ₹15,00,000: (₹3,00,000 @ 20%) = ₹60,000
- Above ₹15,00,000: (₹2,25,000 @ 30%) = ₹67,500
Total Tax Payable: ₹2,07,500
Add Cess at 4%: ₹8,300
Final Income Tax Liability: ₹2,15,800
How to Calculate Income Tax Liability Under the Old Tax Regime
The July Budget 2024 has kept the income tax slabs under the Old Tax Regime unchanged. If a salaried taxpayer opts for the Old Tax Regime, they can claim various deductions and tax exemptions.
By claiming deductions such as Section 80C, Section 80D, and HRA tax exemption, one can reduce their gross taxable income, thereby reducing income tax liability.
Remember that the income tax slabs under the Old Tax Regime depend on the age of the individual.
Example:
Suppose an individual aged below 60 years has a gross total income of ₹17 lakh for FY 2024-25. They opt for the Old Tax Regime and are eligible to claim the following tax exemptions and deductions:
- Section 80C: Up to ₹1.5 lakh
- Section 80CCD(1b) for NPS investment: ₹50,000
- Section 80D for medical insurance premium: ₹25,000
- Section 80TTA: ₹10,000
Calculation:
Gross Total Income: ₹17,00,000
Section 80C: ₹(1,50,000)
Section 80CCD(1b): ₹(50,000)
Section 80D: ₹(25,000)
Section 80TTA: ₹(10,000)
Net Taxable Income: ₹14,65,000
Tax Calculation (Old Tax Regime):
- Income up to ₹2.5 lakh: Exempt
- ₹2,50,001 to ₹5,00,000: (₹2,50,000 @ 5%) = ₹12,500
- ₹5,00,001 to ₹10,00,000: (₹5,00,000 @ 20%) = ₹1,00,000
- Above ₹10,00,000: (₹4,65,000 @ 30%) = ₹1,39,500
Total Tax Payable: ₹2,52,000
Add Cess at 4%: ₹10,080
Final Income Tax Liability: ₹2,62,080
How to Know Which Income Tax Slab You Fall In
Taxpayers without business income must choose between the two tax regimes each financial year. Determining the applicable income tax slab is essential for this decision.
To determine the income tax slab and rate applicable to your income under either regime, you must first know your taxable income. Under the Old Tax Regime, this involves claiming eligible tax exemptions (such as House Rent Allowance, Leave Travel Allowance, standard deduction) and deductions under sections 80C to 80U.
For example, if your gross total income is ₹12 lakh and you are eligible to claim deductions of ₹2.10 lakh under sections 80C, 80TTA, and 80CCD(1b), your taxable income will be ₹9.9 lakh. In the Old Tax Regime, you would fall into the income tax slab of ₹5 lakh to ₹10 lakh, with a tax rate of 20%.
Under the New Tax Regime (as revised in July 2024), a standard deduction of ₹75,000 from salary and pension income is allowed, along with a Section 80CCD (2) deduction up to 14% on the employer's contribution to the employee's Tier-I NPS account.
Surcharge on Income Tax
The July Budget 2024 made no changes to the surcharge rates applicable to income tax amounts under either the New or Old Tax Regimes. A surcharge is levied if an individual's net taxable income exceeds a specified level, and is calculated on the income tax payable amount before the levy of cess. A surcharge is applicable if an individual's taxable income exceeds ₹50 lakh.
Surcharge Rates Under New Tax Regime (Effective April 1, 2023)
| Income Range | Surcharge Rate |
|---|---|
| Up to ₹50 lakh | Nil |
| More than ₹50 lakh but up to ₹1 crore | 10% |
| More than ₹1 crore but up to ₹2 crore | 15% |
| More than ₹2 crore | 25% |
Individuals opting for the Old Tax Regime will continue to pay surcharge rates that were applicable in previous financial years.
Surcharge Rates Under Old Tax Regime
| Income Range | Surcharge Rate |
|---|---|
| Up to ₹50 lakh | Nil |
| More than ₹50 lakh but up to ₹1 crore | 10% |
| More than ₹1 crore but up to ₹2 crore | 15% |
| More than ₹2 crore but up to ₹5 crore | 25% |
| More than ₹5 crore | 37% |
There are exceptions to these surcharge rates. If an individual has earned income from capital gains or dividend income, the surcharge will not exceed 15%, irrespective of the income range.
Marginal relief may apply when the surcharge exceeds the increase in income over the specified limit.
Income Tax Slabs for FY 2020-21, FY 2021-22, FY 2022-23 Under New Tax Regime
Effective from April 1, 2020, individuals have the option to continue with the Old Tax Regime or opt for the New Tax Regime. From FY 2023-24, the New Tax Regime has become the default option.
Income Tax Rates and Slabs in New Tax Regime for FY 2020-21, FY 2021-22, FY 2022-23
| Income Tax Slabs | Income Tax Rates |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 to ₹5,00,000 | 5% of (total income minus ₹2,50,000) |
| ₹5,00,001 to ₹7,50,000 | ₹12,500 + 10% of (total income minus ₹5,00,000) |
| ₹7,50,001 to ₹10,00,000 | ₹37,500 + 15% of (total income minus ₹7,50,000) |
| ₹10,00,001 to ₹12,50,000 | ₹75,000 + 20% of (total income minus ₹10,00,000) |
| ₹12,50,001 to ₹15,00,000 | ₹1,25,000 + 25% of (total income minus ₹12,50,000) |
| Above ₹15,00,001 | ₹1,87,500 + 30% of (total income minus ₹15,00,000) |
The proposed changes aim to refine India's income tax system. Taxpayers should stay informed and consult tax professionals. Remember, the details outlined are based on *proposed* changes, and the final regulations for FY 2025-26 may vary.