Income Tax: New Tax Regime for FY 2025-26 (AY 2026-27).
The finance minister Nirmala Sitharaman has introduced significant changes to the income tax slabs under the new tax regime in the Union Budget 2025. These new slabs will be effective from April 1, 2025, for the financial year 2025-26. Restructuring tax slabs aims to simplify the tax system and offer relief to taxpayers across different income brackets.
Income Tax Slab In India as of February 1, 2025.
The revised slabs under the new tax regime are as follows:
| Income tax Slab | Income Tax rate |
| 🔹Rs.00 to Rs. 4 lakh | Nill |
| 🔹Rs. 4 lakh – Rs. 8 lakh | 5% |
| 🔹Rs. 8 lakh – Rs. 12 lakh | 10% |
| 🔹Rs. 12 lakh – Rs. 16 lakh | 15% |
| 🔹Rs. 16 lakh – Rs. 20 lakh | 20% |
| 🔹Rs. 20 lakh – Rs. 24 lakh | 25% |
| 🔹Above Rs. 24 lakh | 30% |
However, Once an individual’s taxable income exceeds Rs. 12 lakh, tax applies to the entire taxable income based on the following revised rates:
| Taxable Income (Rs.) | Tax Rate (%) |
| 🔹0 – 12,00,000 | Nil |
| 🔹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% |
Tax Saving Breakdown Under the New Regime
| Income bracket (Rs.) | Tax Saving (Rs.) |
| 🔹4 lakh to 8 lakh | 20,000 |
| 🔹8 lakh to 12 lakh | 40,000 |
| 🔹12 lakh to 16 lakh | 45,000 |
| Total Tax | 1,05,000 |
Net Tax Savings: Rs. 35,000 for those earning Rs. 15 lakh annually, even without the section 87A rebate.
Official Statement from FM Office
- Zero Income Tax up to Rs.12 lakh under the New Tax Regime.
- Slabs and tax rates revised across the board to benefit all taxpayers.
- The new structures aim to significantly reduce the tax burden on the middle class, leaving more money in their hands to boost consumption, savings, and investments.
- Nill tax slab extended up to Rs.12.75 lakh for salaried taxpayers, factoring in a standard deduction of Rs.75,000.
Income Tax Scenarios in AY 2026-27
The new tax regime introduces structured tax slabs, providing clarity on how income tax is calculated based on taxable income.
Scenario 1: Income Rs.11.5 lak (Less than Rs,12 lakh).
- Since your taxable income is below Rs.12 lakh, you qualify for the full Section 87A rebate.
- Total tax payable = Rs.00
Scenario 2: Income Rs.12.75 lakh (Between Rs.12 lakh – Rs.12.75 lakh).
- After availing of the Rs.75000 standard deduction, taxable income reduces to Rs lakh.
- This ensures you still qualify for the 100% rebate, leading to zero tax liability.
Scenerio 3: Income Rs.13 lakh (More than Rs.12.75 lakh).
- Since the income tax exceeds Rs.12.75 lakh, the rebate is no longer available.
- Taxable income after standard deduction = Rs.13 lakh – Rs.75,000 = Rs.12.25 lakh.
- Total tax before marginal relief = Rs. 63,750.
- With marginal relief, applicable tax liability = Rs. 25000 + cess.
- Tax calculation:
| Income Slab (Rs.) | Tax (In Percentage) | Tax (In Rs.) |
| 0 – 4 lakh | No Tax | Nil |
| 4 – 8 lakh | 5% on 4 lakh | 20,000 |
| 8 – 12 lakh | 10% on 4 lakh | 40,000 |
| 12 – 12.25 lakh | 15% on Rs. 25000 | 3,750 |
Tax Breakdown
Breakdown of tax liability at different income levels.
Income = Rs.13 lakh:
- 15% tax on Rs.12-13 lakh = Rs.15,000.
- Total tax payable = Rs.75,000.
Income = Rs.15 lakh:
- 15% tax on Rs.12-15 lakh = Rs.45,000.
- Total tax payable Rs.1,05,000.
Income = Rs.20 lakh:
- 20% tax on Rs.16-20 lakh = Rs.80,000.
- Total tax payable = Rs.2,00,00.
Income = Rs.25 lakh:
- 30% tax on Rs.24-25 lakh = Rs.30,000.
- Total tax payable = Rs.3,30,00.
80C limit for FY 2024-25
The maximum limit for claiming tax benefits under Section 80C remains at Rs. 1.5 lakh for FY 2024-25, the same as the current fiscal year 2023-24. This limit allows individuals to reduce their taxable income by investing in specified instruments like EPF, PPF, ELSS, and NSC, and paying life insurance premiums.
Key Differences
- Deductions: The primary difference lies in the availability of deductions and exemptions. The old regime allows for a wider range, while the new regime has limited options.
- Tax Rates: The new regime generally offers lower tax rates compared to the old regime.
- Simplicity: The new regime is simpler to calculate as it doesn’t involve multiple deductions and exemptions.
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Reference
https://www.indiabudget.gov.in/
https://www.incometax.gov.in/iec/foportal/help/new-tax-vs-old-tax-regime-faqs