Income Tax Slabs FY 2025-26 (AY 2026-27): New vs Old Regime Rates
As the new financial year begins, it’s crucial for every taxpayer in India, whether a salaried individual or a small business owner, to understand the tax landscape to maximize their savings. This comprehensive income tax slabs 2025-26 guide will walk you through everything you need to know. Before we dive in, let’s clarify two important terms: the Financial Year (FY) 2025-26 is the period from April 1, 2025, to March 31, 2026, when you earn your income. The Assessment Year (AY) 2026-27 is the following year when this income is evaluated and your taxes are filed. The central decision every taxpayer must make is choosing between the New Tax Regime and the Old Tax Regime. A clear understanding of the income tax slabs FY 2025-26 is the essential first step towards making an informed and financially sound decision for the year ahead.
The New Tax Regime: Understanding the Default Option for FY 2025-26
For the Financial Year 2025-26, the New Tax Regime continues to be the default option for all taxpayers. This means that if you do not explicitly choose a regime while filing your Income Tax Return (ITR), your tax liability will automatically be calculated based on the rules and slab rates of the new system. This regime was introduced to simplify the tax process by offering lower, more streamlined tax rates, albeit at the cost of most traditional deductions and exemptions. The primary appeal of this regime lies in its simplicity, as it eliminates the need to track and claim numerous exemptions that were the hallmark of the old system. Understanding the nuances of the new vs old regime income tax slabs India is critical because this default setting could either be beneficial or detrimental depending on your specific financial profile, investment habits, and major expenses like home loan EMIs or rent.
Key Features of the New Tax Regime
The New Tax Regime is structured to offer straightforward tax calculations with some key characteristics that set it apart from the traditional system. Its primary attraction is the significantly lower tax rates across various income brackets, which can lead to lower tax outgo for individuals who do not have substantial investments or expenses to claim as deductions. However, this benefit comes with a major trade-off: the inability to claim most popular deductions. This includes exemptions under Section 80C (for investments in PPF, ELSS, Life Insurance, etc.), Section 80D (for health insurance premiums), House Rent Allowance (HRA), and the deduction on home loan interest under Section 24(b). Despite these limitations, a few crucial benefits are still available:
- Standard Deduction: A flat deduction of ₹50,000 is available for salaried individuals and pensioners, which helps reduce taxable income directly.
- Employer’s NPS Contribution: The deduction for an employer’s contribution to the National Pension System (NPS) under Section 80CCD(2) is still permitted.
- Tax Rebate: A rebate under Section 87A ensures that individuals with a net taxable income up to ₹7,00,000 pay zero tax.
Table: New Regime Income Tax Slabs FY 2025-26 Rates
Here is a clear breakdown of the income tax slabs FY 2025-26 rates under the New Tax Regime for individuals and HUF:
| Income Slab | 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% |
Health & Education Cess and Surcharge
It is important to remember that the final tax liability is not just the amount calculated from the slabs. A Health and Education Cess of 4% is levied on the calculated income tax amount. Additionally, for high-income earners, a surcharge is applicable on the income tax if the total income exceeds certain thresholds. The surcharge rate starts at 10% for income above ₹50 lakh and goes up to 25% for income above ₹2 crore under the new regime.
The Old Tax Regime: Leveraging Deductions for Tax Savings
While the New Tax Regime is the default, taxpayers still have the option to consciously opt for the Old Tax Regime if it proves to be more financially advantageous for them. This regime is characterized by higher slab rates compared to the new system, but its main strength lies in the vast array of deductions and exemptions it offers. For individuals who make significant tax-saving investments, have a home loan, or pay a large amount in rent, the Old Tax Regime can substantially reduce their taxable income, often resulting in a lower overall tax liability despite the higher marginal tax rates. Making this choice requires a deliberate action during the ITR filing process; you must specifically select the Old Tax Regime to have your taxes calculated under its provisions.
Key Features of the Old Tax Regime
The fundamental principle of the Old Tax Regime is the trade-off between higher tax rates and more deductions. It encourages savings and specific types of expenditure by offering tax benefits on them. This system is ideal for taxpayers who have meticulously planned their finances to take full advantage of the available exemptions. Some of the most popular and impactful deductions that can be claimed only under the Old Tax Regime include:
- Section 80C: Up to ₹1.5 lakh for investments in PPF, EPF, ELSS, life insurance premiums, home loan principal repayment, etc. Our guide on Understanding Section 80C: Benefits and Investment Options provides more detail.
- Section 80D: Deduction for health insurance premiums paid for self, family, and parents.
- House Rent Allowance (HRA): Exemption for rent paid, which is a significant benefit for those living in rented accommodation.
- Leave Travel Allowance (LTA): Exemption for travel expenses incurred within India.
- Section 24(b): Deduction of up to ₹2 lakh on interest paid on a home loan for a self-occupied property.
- Section 80G: Deductions for donations made to specified funds and charities.
Table: Old Regime Income Tax Slabs for FY 2025-26 Salaried People & Others
The income tax slabs for FY 2025-26 salaried people and other individuals under the Old Tax Regime vary based on age. Below are the separate slabs for different categories.
For Individuals (below 60 years) & HUF:
| Income Slab | Tax Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
For Senior Citizens (Age 60 to 80 years):
The basic exemption limit is ₹3,00,000. The 5% tax slab is from ₹3,00,001 to ₹5,00,000. Other slabs remain the same.
For Super Senior Citizens (Age above 80 years):
The basic exemption limit is ₹5,00,000. Tax is only applicable on income above this threshold, starting directly with the 20% slab for income between ₹5,00,001 and ₹10,00,000.
Cess and Surcharge Applicability
Just like the new regime, the final tax calculated under the old regime is also subject to a 4% Health and Education Cess. The surcharge rules for high-income earners are also applicable here, with rates going up to 37% for income exceeding ₹5 crore.
New vs. Old Regime: An Income Tax Comparison to Help You Decide
Choosing between the two tax regimes is one of the most important financial decisions you will make this year. A detailed income tax comparison old new regime India is necessary to determine which path leads to greater savings, and our analysis of Old vs New Tax Regime: Which is Better for Salaried Individuals in 2025? can help you make that choice. For some, the simplicity and lower rates of the new regime will be more beneficial, while for others, the power of deductions in the old regime will result in a significantly lower tax outgo. There is no one-size-fits-all answer, and the only way to know for sure is to calculate your tax liability under both scenarios.
At a Glance: Feature Comparison Table
This table provides a direct comparison of the key features of both regimes to help you quickly assess the differences:
| Feature | New Tax Regime | Old Tax Regime |
|---|---|---|
| Basic Exemption Limit | ₹3,00,000 | ₹2,50,000 (below 60), ₹3 Lakh (senior), ₹5 Lakh (super senior) |
| Section 80C/80D Deductions | Not Available | Available (up to ₹1.5 Lakh and specified limits) |
| HRA Exemption | Not Available | Available |
| Home Loan Interest (Sec 24b) | Not Available | Available (up to ₹2 Lakh) |
| Standard Deduction | Available (₹50,000 for salaried) | Available (₹50,000 for salaried) |
| Tax Rebate (Sec 87A) | Available up to ₹7 Lakh income | Available up to ₹5 Lakh income |
| Tax Rates | Lower and more slabs | Higher with fewer slabs |
Practical Example: Calculating Tax for a Salaried Employee
Let’s take a practical scenario to understand the impact of this choice.
Scenario: Priya is a salaried individual with a gross salary of ₹15,00,000. She plans to claim the following deductions:
- Section 80C Investment: ₹1,50,000
- Section 80D (Health Insurance): ₹25,000
- Home Loan Interest (Section 24b): ₹2,00,000
Calculation under the New Regime:
- Gross Salary: ₹15,00,000
- Less: Standard Deduction: ₹50,000
- Taxable Income: ₹14,50,000
- Tax Calculation:
- On ₹3,00,000: Nil
- On next ₹3,00,000 (3L to 6L) @ 5%: ₹15,000
- On next ₹3,00,000 (6L to 9L) @ 10%: ₹30,000
- On next ₹3,00,000 (9L to 12L) @ 15%: ₹45,000
- On remaining ₹2,50,000 (12L to 14.5L) @ 20%: ₹50,000
- Total Tax: ₹1,40,000
- Add 4% Cess (₹5,600): ₹5,600
- Total Tax Payable (New Regime): ₹1,45,600
Calculation under the Old Regime:
- Gross Salary: ₹15,00,000
- Less: Standard Deduction: ₹50,000
- Less: Section 80C: ₹1,50,000
- Less: Section 80D: ₹25,000
- Less: Home Loan Interest: ₹2,00,000
- Taxable Income: ₹10,75,000
- Tax Calculation:
- On ₹2,50,000: Nil
- On next ₹2,50,000 (2.5L to 5L) @ 5%: ₹12,500
- On next ₹5,00,000 (5L to 10L) @ 20%: ₹1,00,000
- On remaining ₹75,000 (above 10L) @ 30%: ₹22,500
- Total Tax: ₹1,35,000
- Add 4% Cess (₹5,400): ₹5,400
- Total Tax Payable (Old Regime): ₹1,40,400
Conclusion: In Priya’s case, by opting for the Old Tax Regime, she saves ₹5,200. This example clearly illustrates why a personalized calculation is non-negotiable.
Who Should Stick to the Old Regime vs. Opt for the New?
- Choose the Old Regime if: You are a taxpayer who fully utilizes the deduction limits. This typically includes individuals who have significant investments in PPF, ELSS, NPS, pay high health insurance premiums, have an active home loan, and claim a substantial HRA exemption. If your total claimable deductions are high (generally above ₹3.75 lakh), the old regime is likely more beneficial.
- Choose the New Regime if: You prefer simplicity and have minimal investments or expenses to claim as deductions. This regime is suitable for young professionals who may not have a home loan, those who don’t invest heavily in tax-saving instruments, or individuals whose employers don’t provide a favorable HRA structure.
How to Choose Your Tax Regime and Plan for AY 2026-27
Making the right choice requires a systematic approach. Instead of guessing, follow these simple steps to ensure you select the regime that minimizes your tax outflow for the Assessment Year 2026-27.
- Step 1: Collate Your Financial Data
Before you can compare, you need a clear picture of your finances. List down your total annual income from all sources (salary, business, rent, etc.). Then, create a comprehensive list of all potential investments and expenses that qualify for deductions under the Old Tax Regime, such as your 80C contributions, health insurance premiums, home loan interest and principal, HRA details, and any donations. - Step 2: Use an Income Tax Calculator
Once you have your financial data, the next step is to calculate your tax liability under both regimes. Manually calculating this can be complex and prone to errors. It is highly recommended to use a reliable online tax calculator. For an unbiased comparison, you can use the official tool provided on the Income Tax Department Portal. You can also use TaxRobo’s easy-to-use income tax services to see your tax liability in seconds and get expert assistance. - Step 3: Make an Informed Decision
After comparing the final tax payable amounts from the calculator, the choice becomes clear. Select the regime that results in a lower tax payment. Remember that this choice depends entirely on your unique financial situation for the year.
If you’re unsure about the calculations or want personalized advice based on your complete financial profile, our experts at TaxRobo can analyze your finances and guide you. Connect with us for expert tax planning services.
Conclusion
The choice between the New and Old Tax Regimes is the cornerstone of effective tax planning for the financial year 2025-26. While the New Tax Regime offers simplicity and lower rates as the default option, the Old Tax Regime retains its value for taxpayers who can leverage a wide range of deductions to significantly lower their taxable income. As we’ve seen, making an assumption without running the numbers can lead to paying higher taxes unnecessarily. The key takeaway is that a careful, individualized comparison is essential to ensure you are maximizing your tax savings. We encourage you to use the information and tables on income tax slabs FY 2025-26 provided in this guide to plan your taxes wisely for the upcoming Assessment Year 2026-27.
Don’t leave your tax planning to the last minute. Get in touch with TaxRobo for expert ITR filing and advisory services to ensure a smooth and financially optimized tax season.
Frequently Asked Questions (FAQs)
Q1. Can I switch between the new and old tax regimes every year?
A: Salaried individuals have the flexibility to choose between the new and old tax regimes every financial year. You can select the one that is more beneficial for you at the time of filing your return. However, individuals with income from business or a profession have a more restrictive choice. Once they opt for the new regime, they have only one opportunity in their lifetime to switch back to the old regime.
Q2. What are the income tax rates for salaried individuals 2025-26?
A: The income tax rates for salaried individuals 2025-26 depend entirely on the tax regime chosen. Under the new (default) regime, the tax slabs start from 5% for income above ₹3 lakh and go up to 30%. Under the old regime, the slabs are 5%, 20%, and 30%, starting on income above ₹2.5 lakh, but this regime allows you to claim numerous deductions to lower your taxable income.
Q3. Is the standard deduction of ₹50,000 available in both tax regimes?
A: Yes. Following the latest updates, the standard deduction of ₹50,000 is available to salaried individuals and pensioners under both the new and the old tax regimes. This is a flat deduction from your gross salary income.
Q4. What is the last date to file ITR for FY 2025-26 (AY 2026-27)?
A: For most individual taxpayers and HUFs whose accounts are not required to be audited, the due date to file the Income Tax Return (ITR) is typically July 31, 2026. You can follow our AY 2025-26: Step-by-Step Guide for Salaried Employees to File ITR Online to complete the process. For taxpayers who require an audit (like certain businesses and professionals), the due date is usually October 31, 2026.
(Disclaimer: These dates are based on previous years and are subject to change as per official notifications from the Government of India).
Q5. If I don’t choose a regime, which one will be applied?
A: The New Tax Regime is the default tax regime. If you do not make an explicit choice by opting for the Old Tax Regime while filing your income tax return, your tax liability will be automatically calculated based on the rules and slab rates of the New Tax Regime.
