Quick Overview
- The new tax regime offers lower tax rates with fewer exemptions and deductions.
- It is the default regime for taxpayers unless they opt for the old regime.
- The rebate under Section 87A makes income up to ₹7 lakh tax-free (subject to conditions).
- Standard deduction is available for salaried individuals and pensioners.
- Seven slab rates apply under the new regime.
- Surcharge and 4% Health & Education Cess are applicable.
- Employer’s contribution to NPS under Section 80CCD(2) is allowed.
- The regime aims to simplify compliance and reduce paperwork.
The income tax slabs new regime refers to the revised income tax structure introduced by the Government of India to simplify taxation and reduce tax rates while removing most exemptions and deductions. First introduced in FY 2020-21, the new tax regime has undergone multiple changes, and from FY 2023-24, it became the default regime. Further refinements continue in income tax slabs in the new regime, FY 2025-26, India, making it more attractive for salaried and middle-income taxpayers.
This detailed guide explains slab rates, tax-free limits, deductions allowed, comparisons with the old regime, and practical examples for India income tax slabs in the new regime, FY 2025-26.
What Are Income Tax Slabs?
Income tax slabs are predefined income ranges on which different tax rates apply. In India, tax is calculated progressively—meaning higher income is taxed at higher rates.
For example, part of your income may be taxed at 5%, another portion at 10%, and so on. The total tax payable is calculated by applying slab rates to corresponding income brackets.
Overview of New Tax Regime in India
The new regime was introduced to:
- Simplify tax filing
- Reduce dependency on tax-saving investments
- Offer lower tax rates
- Minimise exemptions and deductions
Under the income tax slabs new regime FY 2024-25 and continued in the income tax slabs new regime FY 2025-26, Indian, taxpayers can choose between:
- Old Tax Regime (higher rates, more deductions)
- New Tax Regime (lower rates, fewer deductions)
The new regime is now the default option.
Features of the New Tax Regime FY 2025-26
Key features of India's income tax slabs under the new regime for FY 2025-26 include:
- Seven slab structure
- Basic exemption limit of ₹3 lakh
- Rebate under Section 87A for income up to ₹7 lakh
- Standard deduction of ₹50,000 (for salaried & pensioners)
- Reduced surcharge rate (maximum 25%)
- No major exemptions like 80C, 80D, HRA (with exceptions)
Income Tax Slabs for Individuals Below 60 Years Under the New Regime
The slab rates for FY 2025-26 (Assessment Year 2026-27) are:
Income Range |
Tax Rate |
Up to ₹3,00,000 |
Nil |
₹3,00,001 – ₹6,00,000 |
5% |
₹6,00,001 – ₹9,00,000 |
10% |
₹9,00,001 – ₹12,00,000 |
15% |
₹12,00,001 – ₹15,00,000 |
20% |
Above ₹15,00,000 |
30% |
These slabs apply to individuals below 60 years.
Income Tax Slabs for Senior Citizens (60 to 80 Years) Under the New Regime
Under the new regime, there is no separate slab benefit for senior citizens. The same slab rates apply as mentioned above.
Income Tax Slabs for Super Senior Citizens (Above 80 Years) Under the New Regime
Similarly, super senior citizens do not receive a higher exemption limit under the new regime. The standard slab rates apply to all individuals.
Suggested Read: What Is Retirement Planning?
Tax-Free Income Under the New Tax Regime
Although the basic exemption limit is ₹3 lakh, income up to ₹7 lakh can effectively become tax-free due to:
- Rebate under Section 87A (for taxable income up to ₹7 lakh)
- Standard deduction benefit
Thus, salaried individuals earning up to ₹7.5 lakh (including standard deduction) may have zero tax liability.
Comparison of the New Tax Regime vs the Old Tax Regime
Key Differences Between Old and New Tax Regimes
Feature |
Old Regime |
New Regime |
Tax Rates |
Higher |
Lower |
Deductions (80C, 80D, etc.) |
Allowed |
Mostly Not Allowed |
HRA, LTA |
Allowed |
Not Allowed |
Standard Deduction |
Allowed |
Allowed |
Default Option |
No |
Yes |
Which Regime Is More Beneficial for Different Income Groups?
- Low-income earners: The new regime may be beneficial due to the rebate.
- High investment taxpayers: The old regime may offer better savings if claiming large deductions.
- Middle-income earners: Depends on total deductions claimed.
Conditions for Opting for the New Tax Regime
- It is the default regime.
- Salaried individuals can choose every year while filing their ITR.
- Business/professional taxpayers can switch back only once.
Exemptions and Deductions Not Available Under the New Tax Regime
Major deductions not allowed:
- Section 80C (PPF, ELSS, LIC)
- Section 80D (Health insurance premium)
- HRA exemption
- LTA
- Interest on housing loan (self-occupied property)
- Most Chapter VI-A deductions
Must Explore: Health Insurance Plans
Exemptions and Deductions Available Under the New Tax Regime
Allowed deductions include:
- Standard deduction
- Employer’s contribution to NPS (Section 80CCD(2))
- Deduction for family pension
- Agniveer Corpus Fund contribution
Suggested Read: This Added Health Insurance Benefit Will Blow Your Mind!
How to Calculate Income Tax Under the New Regime
Step 1: Determine Gross Taxable Income
Add salary, business income, capital gains, and other sources of income.
Step 2: Apply Applicable Tax Slabs
Divide income according to slab ranges and calculate tax for each portion.
Step 3: Consider Surcharge, Rebate & Cess
- Add a surcharge if income exceeds specified thresholds.
- Apply rebate under Section 87A (if eligible).
- Add 4% Health & Education Cess.
Step 4: Final Tax Payable
After adjustments, the final amount is your total tax liability.
Tax Calculation Examples Under the New Regime FY 2025-26
Example 1: Income Below Rs. 12 Lakh
Annual Income: ₹10,00,000
Tax calculation:
- 0–3L: Nil
- 3–6L: 5% = ₹15,000
- 6–9L: 10% = ₹30,000
- 9–10L: 15% = ₹15,000
Total tax = ₹60,000
- 4% cess = ₹62,400
Example 2: Income Between Rs. 12 Lakh – Rs. 15 Lakh
Annual Income: ₹14,00,000
Tax = ₹1,20,000
- 4% cess = ₹1,24,800
Example 3: Income Above Rs. 15 Lakh
Annual Income: ₹20,00,000
Tax = ₹3,00,000
- cess = ₹3,12,000
How to Save Taxes Under the New Tax Regime
Tax Saving Option |
Section / Rule |
Who Can Claim |
Maximum Limit |
How It Works |
Practical Example |
Employer’s Contribution to NPS |
Section 80CCD(2) |
Salaried employees |
10% of salary (Basic + DA) for private employees; 14% for Central/State Govt employees |
Employer’s contribution to NPS is deductible from taxable income under the new regime. Employee’s own contribution under 80CCD(1) is NOT allowed. |
If Basic + DA = ₹8,00,000, employer contributes 10% = ₹80,000. This ₹80,000 is deductible from taxable income. |
Standard Deduction |
Section 16(ia) |
Salaried individuals & pensioners |
₹50,000 (flat deduction) |
Automatically deducted from gross salary income before calculating tax. No bills or proof required. |
If salary is ₹10,00,000 → Taxable income becomes ₹9,50,000 after deduction. |
Family Pension Deduction |
Section 57(iia) |
Individuals receiving a family pension |
Lower of ₹15,000 or 1/3rd of pension |
Deduction allowed from family pension income even under the new regime. |
Family pension ₹60,000 annually → 1/3rd = ₹20,000 → Deduction allowed = ₹15,000. |
Choice of Salary Perquisites |
Salary Structuring |
Salaried employees |
No fixed limit (depends on structure) |
Certain employer-provided benefits may be tax-efficient compared to direct salary. |
Meal coupons, company-leased car (as per valuation rules), and telephone reimbursements may reduce taxable salary. |
Gratuity & Leave Encashment (on retirement) |
Section 10(10), 10(10AA) |
Retiring employees |
As per the prescribed limits |
Exemptions on retirement benefits are still available under the new regime. |
Gratuity received within government-prescribed limits remains tax-free. |
Employer Contribution to EPF |
Section 17(2)(vii) |
Salaried employees |
Combined cap of ₹7.5 lakh (EPF + NPS + Superannuation) |
Employer’s contribution exceeding ₹7.5 lakh annually becomes taxable. Within the limit, it remains tax-free. |
If total employer contribution is ₹6 lakh → Fully tax-exempt. |
Interest on EPF (up to threshold) |
Rule-based |
EPF subscribers |
Interest on employee contribution up to ₹2.5 lakh per year |
Interest earned within prescribed limits remains tax-free. |
If yearly EPF contribution ≤ ₹2.5 lakh → Interest remains exempt. |
Transport Allowance (for specially-abled employees) |
Section 10 |
Specially-abled employees |
₹3,200 per month |
Exemption available even under the new regime. |
₹38,400 annually exempt. |
Conveyance Allowance for official duties |
Section 10 |
Salaried employees |
Actual expense |
Allowance for official duties remains exempt. |
Reimbursement of official travel expenses is not taxed. |
Gifts up to ₹50,000 |
Income Tax Rule |
All taxpayers |
₹50,000 per financial year |
Gifts received within ₹50,000 from non-relatives remain non-taxable. |
Gifts worth ₹45,000 → Not taxable. |
Income Tax Changes Effective from 1st April 2025
Slab Rate Relaxation
No major rate increase; simplified slab structure continues.
Rebate Relaxation Under Section 87A
Rebate benefit ensures zero tax for eligible incomes up to ₹7 lakh.
Relaxation of TDS Threshold Limits
Certain TDS limits have been rationalised to reduce compliance burden.
Changes in Deductions and Exemptions
Limited flexibility remains under the new regime; focus is on simplified taxation.
Surcharge, Marginal Relief, and Health & Education Cess
- Surcharge applies to income above ₹50 lakh.
- The maximum surcharge under the new regime is capped at 25%.
- Marginal relief ensures that additional tax does not exceed incremental income.
- 4% Health & Education Cess applies to the total tax.
Budget 2025-26 Highlights: Key Announcements & Changes
- Continued support for the simplified tax regime
- Rationalised slab benefits
- Enhanced digital compliance
- Focus on reducing litigation and easing the filing process
Benefits and Drawbacks of the New Tax Regime
Benefits of the New Tax Regime
- Lower tax rates
- Simplified filing
- No need for tax-saving investments
- Reduced paperwork
Drawbacks of the New Tax Regime
- Limited deductions
- No HRA, 80C, 80D benefits
- Not ideal for high investors
Additional Considerations
Evaluate based on income, investments, and financial goals.
How to Switch Between Old and New Tax Regimes
- Salaried individuals: Choose while filing ITR each year.
- Business owners: Limited switching allowed.
Tips for Choosing the Right Tax Regime
- Calculate tax under both regimes.
- Consider long-term investments.
- Evaluate deductions available.
- Consult a tax professional if needed.
How to Know Which Income Tax Slab You Fall In
Income Range (₹) |
Old Tax Regime (Below 60 Years) |
New Tax Regime (All Individuals) |
Up to 2,50,000 |
Nil |
Nil (Up to ₹3,00,000) |
2,50,001 – 3,00,000 |
5% |
5% (3,00,001 – 6,00,000) |
3,00,001 – 5,00,000 |
5% |
5% (Continues till ₹6,00,000) |
5,00,001 – 6,00,000 |
20% |
10% (6,00,001 – 9,00,000) |
6,00,001 – 9,00,000 |
20% |
10% |
9,00,001 – 10,00,000 |
20% |
15% (9,00,001 – 12,00,000) |
10,00,001 – 12,00,000 |
30% |
15% |
12,00,001 – 15,00,000 |
30% |
20% |
Above 15,00,000 |
30% |
30% |
Basic Exemption Limit Comparison
Category |
Old Regime |
New Regime |
Individuals below 60 years |
₹2,50,000 |
₹3,00,000 |
Senior Citizens (60–80 years) |
₹3,00,000 |
₹3,00,000 |
Super Senior Citizens (80+ years) |
₹5,00,000 |
₹3,00,000 |
Rebate Under Section 87A
Particulars |
Old Regime |
New Regime |
Rebate Eligibility |
Taxable income up to ₹5,00,000 |
Taxable income up to ₹7,00,000 |
Maximum Rebate |
₹12,500 |
₹25,000 |
Effective Tax-Free Income |
₹5 lakh |
₹7 lakh |
Key Structural Differences
Feature |
Old Tax Regime |
New Tax Regime |
Number of Slabs |
4 |
6 (plus basic exemption) |
Highest Rate |
30% |
30% |
Standard Deduction |
Available |
Available |
Section 80C, 80D |
Allowed |
Not Allowed |
HRA & LTA |
Allowed |
Not Allowed |
Surcharge (Max Rate) |
37% |
25% |
Complexity |
Higher (multiple deductions) |
Lower (simplified structure) |
Conclusion: Understanding Income Tax Slabs in the New Regime
The income tax slabs under the new regime for FY 2025-26 in India aim to simplify taxation while offering competitive rates. For taxpayers who prefer straightforward compliance without investment-linked deductions, the new regime is often beneficial. However, individuals claiming substantial deductions under 80C, 80D, or home loan interest may find the old regime more advantageous.
Before filing returns, always compute tax under both systems to determine which structure works best for your financial situation.
Suggested Read: Why Your Financial Plan Should Include Health Insurance
Frequently Asked Questions
Does the new tax slab apply to all individuals?
Yes, it is the default regime for individuals, HUFs, and others unless they opt for the old regime.
How is marginal relief computed under the new regime?
Marginal relief ensures the tax payable does not exceed the income exceeding the surcharge threshold.
Can I still claim deductions under the new regime?
Only limited deductions, such as the standard deduction and the employer’s NPS contribution, are allowed.
How will income up to Rs 12 lakh be tax-free?
Income up to ₹7 lakh is tax-free due to a rebate. For ₹12 lakh, tax applies as per slabs.
What are the key differences between old and new tax regimes?
The old regime allows deductions but has higher tax rates; the new regime has lower rates but minimal deductions.
