Income Tax Slabs FY 2025-26 (AY 2026-27): New Tax Regime & Old Regime Rates

The Indian government has introduced significant tax relief under the new tax regime for FY 2025-26 (AY 2026-27), making it the default tax regime for taxpayers. The revised slab rates, increased rebate, and simplified structure are expected to benefit middle-income earners and salaried individuals across India.

At the same time, the old tax regime continues to remain relevant for taxpayers who claim higher deductions such as HRA, home loan interest, Section 80C investments, and medical insurance deductions.

Importantly, choosing the right tax regime is no longer as straightforward as simply comparing slab rates. The actual benefit depends on your:

• Salary structure
• Deductions
• Investments
• Exemptions
• Rental income
• Home loan
• NRI status
• Capital gains

In this guide, we explain the latest income tax slabs for FY 2025-26 under both tax regimes, tax-free income limits, surcharge, rebate, NRI taxation rules, practical tax-saving examples, and how to determine which regime is best for you.

Quick Summary Of Income Tax Slabs FY 2025-26

Particulars	New Tax Regime	Old Tax Regime
Basic Exemption Limit	Rs 4 Lakh	Rs 2.5 Lakh
Maximum Tax Rate	30%	30%
Standard Deduction	Rs 75,000	Rs 50,000
Rebate Under Section 87A	Rs 60,000	Rs 12,500
Tax-Free Salary Income	Rs 12.75 Lakh	Rs 5.5 Lakh
Tax-Free Income	Rs 12 Lakh	Rs 5 Lakh
Default Tax Regime	Yes	No
Best Suitable For	Taxpayers with fewer deductions	Taxpayers claiming high deductions

Key Highlights

• The new tax regime is the default tax regime from FY 2025-26.
• Income up to Rs 12 lakh can effectively become tax-free under the new regime due to rebate benefits.
• Salaried individuals can enjoy tax-free salary income up to Rs 12.75 lakh due to the standard deduction.
• NRIs are not eligible for rebate under Section 87A.
• The old tax regime remains beneficial for taxpayers with substantial deductions and exemptions.
• Senior citizen slab benefits are not available to NRIs.

What Is The Difference Between The Old And New Tax Regime?

The old tax regime allows taxpayers to claim multiple deductions and exemptions. The new tax regime offers lower tax rates but removes most deductions and exemptions.

The decision between both regimes should not be based only on slab rates. Taxpayers should compare the total tax payable after considering all eligible deductions and exemptions.

Feature	New Tax Regime	Old Tax Regime
Lower Tax Slabs	Yes	No
HRA Exemption	No	Yes
Home Loan Benefits	Limited	Available
Section 80C Deduction	Mostly not allowed	Allowed
Section 80D Deduction	Mostly not allowed	Allowed
Standard Deduction	Rs 75,000	Rs 50,000
Rebate Under Section 87A	Available	Available
Tax Filing Complexity	Lower	Higher
Suitable For	Low deduction taxpayers	High deduction taxpayers

Income Tax Slabs Under The New Tax Regime FY 2025-26

The Budget 2025 introduced revised slab rates under the new tax regime to provide relief to middle-income taxpayers.

Income Tax Slabs For FY 2025-26 (AY 2026-27)	Income Tax Rate
Up to Rs 4 Lakh	Nil
Rs 4 Lakh to Rs 8 Lakh	5%
Rs 8 Lakh to Rs 12 Lakh	10%
Rs 12 Lakh to Rs 16 Lakh	15%
Rs 16 Lakh to Rs 20 Lakh	20%
Rs 20 Lakh to Rs 24 Lakh	25%
Above Rs 24 Lakh	30%

Key Features of The New Tax Regime

Higher Rebate Under Section 87A

Under the new regime, the rebate under Section 87A has increased to Rs 60,000 from FY 2025-26.

As a result:

• Taxable income up to Rs 12 lakh can become tax-free.
• Salaried individuals can enjoy tax-free salary income up to Rs 12.75 lakh after the standard deduction.

However, taxpayers must note:

• NRIs cannot claim rebate under Section 87A.
• Rebate is not available on capital gains and special rate income.

Standard Deduction

Salaried employees and pensioners can claim a standard deduction of Rs 75,000 under the new regime.

This significantly reduces taxable salary income.

Lower Surcharge Rate

The maximum surcharge under the new regime is capped at 25%, which benefits high-income taxpayers.

Under the old regime, surcharge can go up to 37%.

Simplified Taxation

The new regime removes most exemptions and deductions, making tax filing simpler and reducing dependency on multiple deduction proofs and exemption calculations.

Income Tax Slabs Under The Old Tax Regime FY 2025-26

The old tax regime remains beneficial for taxpayers who claim substantial deductions and exemptions.

Income Tax Slabs For Individuals Below 60 Years, HUFs & NRIs

Income Tax Slab	Income Tax Rate
Up to Rs 2.5 Lakh	Nil
Rs 2.5 Lakh to Rs 5 Lakh	5%
Rs 5 Lakh to Rs 10 Lakh	20%
Above Rs 10 Lakh	30%

Income Tax Slabs For Senior Citizens (60–80 Years)

Income Tax Slab	Income Tax Rate
Up to Rs 3 Lakh	Nil
Rs 3 Lakh to Rs 5 Lakh	5%
Rs 5 Lakh to Rs 10 Lakh	20%
Above Rs 10 Lakh	30%

Income Tax Slabs For Super Senior Citizens Above 80 Years

Income Tax Slab	Income Tax Rate
Up to Rs 5 Lakh	Nil
Rs 5 Lakh to Rs 10 Lakh	20%
Above Rs 10 Lakh	30%

Major Deductions Available Under The Old Tax Regime

The old regime allows taxpayers to reduce taxable income using deductions and exemptions such as:

• Section 80C investments
• Section 80D medical insurance
• HRA exemption
• LTA exemption
• Home loan interest deduction
• Section 24 deduction
• Education loan interest under Section 80E
• NPS deduction under Section 80CCD(1B)

For taxpayers with substantial deductions, the old regime may still lead to lower overall tax liability.

Major Changes Introduced In Budget 2025

The Budget 2025 introduced several important tax changes:

• Basic exemption limit increased to Rs 4 lakh under the new regime.
• Rebate under Section 87A increased to Rs 60,000.
• Revised slab structure introduced.
• Additional relief provided to middle-income earners.
• Tax-free income threshold increased significantly.

According to tax experts, these changes are aimed at increasing disposable income and boosting consumption among middle-class taxpayers.

Which Tax Regime Is Better For You?

The right tax regime differs from taxpayer to taxpayer.

In our experience assisting taxpayers and NRIs across multiple countries, many individuals choose the new regime without properly comparing their deductions under the old regime. In several cases, salaried taxpayers with home loans and HRA still end up saving more tax under the old regime.

The right regime depends entirely on your deductions and salary structure.

Choose The New Tax Regime If:

• You have limited deductions.
• You do not claim HRA exemption.
• You do not have a home loan.
• You prefer simpler tax filing.
• Your salary structure is straightforward.
• Your deductions are below Rs 5–7 lakh.

Choose The Old Tax Regime If:

• You claim HRA exemption.
• You pay home loan EMI.
• You invest heavily under Section 80C.
• You claim medical insurance deductions.
• Your deductions exceed the break-even threshold.

Break-Even Deduction Analysis

The table below shows the approximate deduction level where the old regime may become more beneficial.

Gross Income	Approximate Break-Even Deduction
Rs 7 Lakh	Rs 1.5 Lakh
Rs 10 Lakh	Rs 4.5 Lakh
Rs 12 Lakh	Rs 6.5 Lakh
Rs 15 Lakh	Rs 5.43 Lakh
Rs 20 Lakh	Rs 7.08 Lakh
Rs 25 Lakh	Rs 8 Lakh

If your deductions exceed these amounts, the old regime may provide better tax savings.

Are Income Tax Slabs Different For NRIs?

The slab rates under both tax regimes remain the same for NRIs and resident taxpayers.

Additionally, NRIs should not assume their final tax liability will also remain the same because several exemptions and benefits available to residents do not apply to NRIs.

For example:

• NRIs cannot claim rebate under Section 87A.
• NRIs cannot claim higher basic exemption limits available to resident senior citizens.
• certain deductions and exemptions may not apply to NRIs.

This is one of the most common areas where NRIs make mistakes while calculating taxes in India.

What Income Is Taxable For NRIs In India?

Only income that is earned, accrued, received, or deemed to accrue or arise in India becomes taxable for NRIs.

The following income is taxable in India for NRIs:

• Salary received for services rendered in India.
• Rental income from Indian property.
• Capital gains from shares, mutual funds, or property located in India.
• Interest earned from NRO accounts.
• Business or professional income arising in India.

Income earned and received outside India generally remains non-taxable in India for NRIs.

Tax-Free Income Under The New and Old Tax Regime

For Resident Individuals

Under the new tax regime:

• Income up to Rs 12 lakh can become tax-free due to rebate benefits.
• Salaried individuals can enjoy tax-free salary income up to Rs 12.75 lakh because of the standard deduction.

Under the old regime:

• Income up to Rs 5 lakh can effectively become tax-free due to rebate under Section 87A.

For NRIs

Under the new regime:

• Tax starts at 5% for taxable income above Rs 4 lakh.
• Rebate under Section 87A is not available.

Under the old regime:

• Tax starts at 5% on taxable income above Rs 2.5 lakh.
• Higher senior citizen exemption limits are not available.

Common Mistakes Taxpayers Make While Choosing Tax Regime

Based on our practical experience handling tax filings, these are some of the most common mistakes taxpayers make:

• Assuming the new regime is always better.
• Ignoring HRA and home loan deductions.
• Failing to compare both regimes before filing.
• Assuming NRIs can claim rebate under Section 87A.
• Overlooking surcharge applicability.
• Ignoring capital gains taxation.
• Not estimating total deductions before choosing regime.

A proper comparison should always be done before filing an income tax return.

Income Tax Calculation Examples

Example 1 – Salaried Employee With Limited Deductions

Mr Arjun earns a salary of Rs 12 lakh annually.

He invests:

• Rs 1.5 lakh under Section 80C
• Rs 30,000 under Section 80D

Tax Liability Under New Regime

Nil

Tax Liability Under Old Regime

Rs 1,10,760

In this case, the new tax regime becomes significantly more beneficial.

Example 2 – Salaried Employee With Home Loan & HRA

Mr Shri earns Rs 25 lakh annually.

He claims:

• HRA exemption
• Home loan benefits
• Rs 1.5 lakh deduction under Section 80C
• Rs 50,000 under Section 80D
• Rs 50,000 under Section 80CCD(1B)

Tax Liability Under New Regime

Rs 3,19,800

Tax Liability Under Old Regime

Rs 3,04,200

Despite the revised slabs under the new regime, the old regime may become more beneficial because of substantial deductions.

This is especially common among salaried professionals living in metro cities with high rent and home loan obligations.

Special Tax Rates Not Covered Under Normal Slabs

The normal slab rates do not apply to certain types of income such as:

• Capital gains
• Crypto income
• Lottery winnings
• Online gaming income
• Certain dividend income

These incomes are taxed at special rates under the Income Tax Act.

Additionally, rebate under Section 87A generally does not apply to such income categories.

Surcharge Rates For FY 2025-26

Surcharge refers to additional tax levied on income tax once taxable income exceeds specified thresholds.

Income Level	Old Regime	New Regime
Up to Rs 50 Lakh	Nil	Nil
Rs 50 Lakh to Rs 1 Crore	10%	10%
Rs 1 Crore to Rs 2 Crore	15%	15%
Rs 2 Crore to Rs 5 Crore	25%	25%
Above Rs 5 Crore	37%	25%

For certain capital gains income under Sections 111A, 112, and 112A, surcharge is capped at 15%.

Health and Education Cess

A health and education cess of 4% applies on:

• Income tax
• Surcharge amount

This cess applies under both tax regimes whenever income tax becomes payable.

Rebate Under Section 87A FY 2025-26

Tax Regime	Maximum Rebate	Eligible Income Threshold
New Regime	Rs 60,000	Rs 12 Lakh
Old Regime	Rs 12,500	Rs 5 Lakh

Important Points:

• NRIs cannot claim rebate under Section 87A.
• rebate does not apply to capital gains and certain special rate income.
• marginal relief on rebate is available under the new regime.

Expert Insight

For salaried taxpayers with minimal deductions, the new tax regime has become more attractive after Budget 2025 due to revised slab rates and higher rebate limits.

Meanwhile, taxpayers with:

• Home loans
• HRA exemptions
• Large 80C investments
• Medical insurance deductions

should still compare both regimes carefully before making a decision.

In practice, many metro-city salaried employees continue to save more tax under the old regime despite the lower slab rates available under the new regime.

The Bottom Line

The best tax regime for FY 2025-26 depends entirely on your:

• Income level
• Deductions
• Exemptions
• Investments
• Financial goals
• NRI status

The new tax regime is simpler and beneficial for taxpayers with limited deductions, whereas the old regime may continue to provide better tax savings for individuals with substantial exemptions and investments.

For NRIs, tax planning becomes even more important because several resident benefits, including rebate under Section 87A and senior citizen exemptions, are not available.

At Savetaxs, we help NRIs across 90+ countries file their income tax returns in India accurately and compliantly. Our experts provide:

• ITR filing support
• DTAA assistance
• Capital gains tax advisory
• NRI tax planning
• Refund assistance
• Compliance support

Connect with our tax experts for professional guidance and error-free NRI tax filing.