Income Tax Slabs for FY 2025-26 & FY 2026-27 (New & Old Tax Regime Rates)
 |
| income tax slabs |
Introduction
The income tax system in India follows a progressive slab rate structure, where the tax rate increases as income rises. Under the Income-tax Act, 1961, taxpayers can choose between two regimes:
- Old Tax Regime – Allows various exemptions and deductions.
- New Tax Regime – Offers lower tax rates without exemptions.
The Finance Bill 2025 has introduced several key updates, including revised income tax slabs, increased rebates, and marginal relief for taxpayers. This article provides a detailed comparison of the tax slabs for FY 2025-26 (AY 2026-27) under both regimes and includes practical examples to clarify their impact on taxpayers earning ₹12 lakh, ₹20 lakh, ₹25 lakh, and ₹55 lakh.
Budget 2025 Updates on Income Tax
As per Budget 2025, individuals earning up to ₹12,00,000 will have zero tax liability under the new tax regime due to the increased rebate of ₹60,000. Salaried individuals can benefit from a ₹75,000 standard deduction, reducing their taxable income.
New Tax Regime Slabs for FY 2025-26 (AY 2026-27)
| Income Tax Slab | 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% |
Note:
- The increased rebate of ₹60,000 under Section 87A ensures zero tax for incomes up to ₹12 lakh.
- Standard deduction of ₹75,000 applies to salaried taxpayers.
- Marginal relief is available for taxpayers whose income slightly exceeds the rebate limit.
Old Tax Regime Slabs for FY 2025-26 (AY 2026-27)
| Income Tax Slab | Age < 60 years | Age 60-80 years | Age > 80 years |
|---|---|---|---|
| Up to ₹2,50,000 | NIL | NIL | NIL |
| ₹2,50,001 – ₹3,00,000 | 5% | NIL | NIL |
| ₹3,00,001 – ₹5,00,000 | 5% | 5% | NIL |
| ₹5,00,001 – ₹10,00,000 | 20% | 20% | 20% |
| Above ₹10,00,000 | 30% | 30% | 30% |
Surcharge and Cess for FY 2025-26
- Surcharge:
- 10% on income between ₹50 lakh – ₹1 crore
- 15% on income between ₹1 crore – ₹2 crore
- 25% on income between ₹2 crore – ₹5 crore
- 37% on income above ₹5 crore
- Health and Education Cess: 4% on tax amount
Comparison of Old vs. New Tax Regime (AY 2026-27)
| Income Slabs | Old Tax Regime | New Tax Regime |
|---|---|---|
| Up to ₹2,50,000 | NIL | NIL |
| ₹2,50,001 – ₹3,00,000 | 5% | NIL |
| ₹3,00,001 – ₹5,00,000 | 5% | 5% |
| ₹5,00,001 – ₹7,00,000 | 20% | 5% |
| ₹7,00,001 – ₹10,00,000 | 20% | 10% |
| ₹10,00,001 – ₹12,00,000 | 30% | 15% |
| ₹12,00,001 – ₹15,00,000 | 30% | 20% |
| ₹15,00,001 and above | 30% | 30% |
Practical Tax Calculation Examples
 |
| income tax calculation |
Example 1: Income ₹12,00,000
New Regime:
- Tax on ₹8,00,001 – ₹12,00,000 @10% = ₹40,000
- Less: Rebate ₹60,000 → Tax Payable: ₹0
Old Regime:
- ₹5,00,001 – ₹10,00,000 @20% = ₹1,00,000
- ₹10,00,001 – ₹12,00,000 @30% = ₹60,000
- Total Tax Payable: ₹1,60,000
Conclusion: New regime is more beneficial.
Example 2: Income ₹20,00,000
New Regime:
- ₹12,00,001 – ₹16,00,000 @15% = ₹60,000
- ₹16,00,001 – ₹20,00,000 @20% = ₹80,000
- Total Tax: ₹1,40,000
Old Regime:
- ₹10,00,001 – ₹20,00,000 @30% = ₹3,00,000
- Total Tax: ₹3,00,000
Conclusion: New regime is more beneficial.
Example 3: Income ₹25,00,000
New Regime:
- ₹20,00,001 – ₹24,00,000 @25% = ₹1,00,000
- ₹24,00,001 – ₹25,00,000 @30% = ₹30,000
- Total Tax: ₹2,70,000
Old Regime:
- ₹10,00,001 – ₹25,00,000 @30% = ₹4,50,000
- Total Tax: ₹4,50,000
Conclusion: New regime is more beneficial.
Example 4: Income ₹55,00,000 (Surcharge & Cess Applied)
New Regime:
- ₹25,00,001 – ₹55,00,000 @30% = ₹9,00,000
- Surcharge @10% = ₹90,000
- Cess @4% = ₹39,600
- Total Tax: ₹10,29,600
Old Regime:
- ₹10,00,001 – ₹55,00,000 @30% = ₹13,50,000
- Surcharge @10% = ₹1,35,000
- Cess @4% = ₹59,400
- Total Tax: ₹15,44,400
Conclusion: New regime is more beneficial.
Conclusion
The Finance Bill 2025 has made the New Tax Regime the preferred choice for many taxpayers due to lower tax rates and increased rebates. However, taxpayers with high exemptions under the old regime may still find it beneficial. Evaluate your financial situation before choosing a regime.
For more tax updates, stay connected with CMA Knowledge!
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