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

India’s income-tax slabs for FY 2025–26 differ between the old and new tax regimes. The new regime has a higher basic exemption limit and lower rates across several income bands, while the old regime allows eligible taxpayers to claim deductions and exemptions that are generally unavailable under the new regime.

This guide covers income earned from 1 April 2025 to 31 March 2026, generally reported for Assessment Year (AY) 2026–27. It explains the slab rates, standard deductions, Section 87A rebate, surcharge, cess and issues that matter to Non-Resident Indians (NRIs).

Tax-year note: The new regime has been the default regime since FY 2023–24; it did not first become the default in FY 2025–26. The Income-tax Act, 2025 came into force on 1 April 2026. For income earned from that date onward, consult guidance for the new tax-year framework rather than applying this FY 2025–26 guide without checking the applicable rules. Read the Ministry of Finance announcement.

Income Tax Slabs FY 2025–26: Old vs New Regime

Important: The ₹12 lakh / ₹12.75 lakh and ₹5 lakh / ₹5.5 lakh nil-tax illustrations apply to eligible resident individuals and assume ordinary income taxed at normal slab rates. NRIs cannot claim the Section 87A rebate. Tax on income taxed at special rates may remain payable even where a rebate is available against eligible normal-rate tax. Standard deduction is available only against eligible salary or pension income, not against every type of income. See the Income Tax Department’s tax-rate guidance.

Key Highlights for FY 2025–26

• The new tax regime has been the default regime since FY 2023–24. Eligible taxpayers can opt for the old regime in accordance with the applicable rules.

• Under the new regime, eligible resident individuals with total income up to ₹12 lakh may receive a Section 87A rebate of up to ₹60,000, subject to the statutory conditions.

• An eligible resident salaried individual with only ordinary salary income may have nil tax on gross salary up to ₹12.75 lakh after the ₹75,000 standard deduction and the applicable rebate.

• NRIs are not eligible for the Section 87A rebate under either regime.

• The higher age-based basic exemption thresholds under the old regime apply to resident senior citizens, not NRIs. The new regime does not provide higher nil-rate thresholds based on age.

• No single deduction figure makes one regime better for every taxpayer. Compare the actual tax under both regimes, including eligibility, rebates, special-rate income, surcharge and cess.

What Is the Difference Between the Old and New Tax Regimes?

The new regime generally offers lower slab rates but restricts many exemptions and deductions. The old regime has different slab rates and allows eligible taxpayers to claim specified exemptions and deductions, such as HRA, qualifying home-loan interest and certain Chapter VI-A deductions.

Do not choose a regime based only on the tax rates in the table. Calculate total tax after applying the deductions and exemptions actually available to you.

Income Tax Slabs Under the New Tax Regime for FY 2025–26

For AY 2026–27, the new-regime slab rates for income taxed at normal slab rates are:

These are progressive rates: each rate applies only to the portion of income falling within that band, not to the whole income. Final liability may also include tax on special-rate income, surcharge where applicable and 4% Health and Education Cess. Official AY 2026–27 slab rates.

Key Features of the New Regime

Section 87A rebate

For AY 2026–27, an eligible resident individual opting for the new regime may claim a rebate of up to ₹60,000 where total income does not exceed ₹12 lakh. Marginal relief may apply just above the threshold. The rebate is not available to NRIs and cannot be used to eliminate tax on income chargeable at specified special rates.

Standard deduction

Eligible salary and pension income may qualify for a standard deduction of up to ₹75,000 under the new regime. Under the old regime, the standard deduction is up to ₹50,000. These deductions reduce eligible salary income; they are not general deductions from every income category. Official guidance on salary deductions.

Surcharge

For individuals opting for the new regime, the surcharge rate is capped at 25% for total income above ₹5 crore. Surcharge thresholds, marginal relief and special rules for certain income types still need to be considered.

Fewer exemptions and deductions

The new regime generally disallows common personal exemptions and deductions, although specific deductions remain permitted under the law. Check the relevant provision rather than assuming every deduction is either allowed or prohibited in every case.

Income Tax Slabs Under the Old Tax Regime for FY 2025–26

The old-regime rates depend on the taxpayer’s status. The higher basic exemption thresholds for senior citizens apply to resident individuals only. NRIs do not receive those higher age-based thresholds merely because of their age.

Other individuals, including NRIs, and HUFs

Resident senior citizens aged 60 to below 80

Resident super senior citizens aged 80 or above

Note: Under the new regime, the basic nil-rate slab is ₹4 lakh regardless of age. Under the old regime, the ₹3 lakh and ₹5 lakh age-based thresholds apply only to resident senior and super senior citizens, respectively. Official individual tax-rate guidance.

Deductions and Exemptions Under the Old Regime

Depending on the taxpayer’s circumstances, eligible items may include:

• Qualifying investments and payments under Section 80C, within the statutory limit.

• Eligible health-insurance premiums under Section 80D, subject to the applicable limits and conditions.

• HRA exemption, calculated under the statutory rules using the relevant salary, rent and location details.

• Eligible leave travel concession/allowance, where the conditions are satisfied.

• Interest on qualifying housing loans under Section 24(b), subject to property type, limits and other rules.

• Eligible NPS contributions under Section 80CCD, where the relevant subsection and conditions are satisfied.

• Eligible education-loan interest under Section 80E.

Eligibility differs by deduction, income type and taxpayer status. Do not assume every NRI can claim every deduction or that all payments qualify. Check the provision and keep supporting records. For a broader list of conditions, refer to the Income Tax Department’s deductions guidance.

Major Changes Relevant to FY 2025–26

Budget 2025 revised the new-regime slab structure and enhanced the Section 87A rebate for eligible resident individuals. Key points for AY 2026–27 include:

• Basic nil-rate slab increased to ₹4 lakh under the new regime.

• Maximum Section 87A rebate increased to ₹60,000 for eligible resident individuals with total income up to ₹12 lakh, subject to conditions and marginal relief where applicable.

• New-regime slab bands at 5%, 10%, 15%, 20% and 25% apply before the 30% rate.

• Standard deduction for eligible salary/pension income under the new regime is up to ₹75,000.

These points describe the FY 2025–26 / AY 2026–27 position. They should not be treated as a substitute for guidance for income earned from 1 April 2026 onward under the Income-tax Act, 2025.

Which Tax Regime Is Better for You?

The answer depends on total income, qualifying deductions and exemptions, rebate eligibility, special-rate income and any surcharge. A resident salaried taxpayer with few deductions may prefer the new regime. A taxpayer with substantial eligible HRA, home-loan interest or other deductions may find the old regime more competitive. Compare both calculations rather than relying on a general rule.

The new regime may suit you if:

• You have few eligible deductions or exemptions.

• You do not qualify for substantial HRA or old-regime home-loan benefits.

• You prefer a simpler computation with fewer deduction claims.

• You are eligible for the enhanced Section 87A rebate and the benefit materially reduces your tax.

The old regime may suit you if:

• You qualify for a material HRA exemption.

• You have eligible home-loan interest or other permitted house-property deductions.

• You can claim substantial qualifying Section 80C, 80D, 80CCD or other old-regime benefits.

• A side-by-side calculation shows a lower overall tax liability after applying all restrictions and benefits.

For taxpayers with business or professional income, the rules for opting out of and returning to the new regime are different from those for taxpayers without such income. Confirm applicable election and filing requirements before choosing.

Break-Even Deduction Analysis: Old vs New Regime

The table below estimates the additional eligible old-regime deductions and exemptions needed for the old-regime tax to approximately match the new-regime tax. It assumes a resident salaried individual with only ordinary salary income, the ₹75,000 new-regime standard deduction, the ₹50,000 old-regime standard deduction, eligibility for Section 87A where relevant, no special-rate income and no surcharge. The old-regime figures below exclude the ₹50,000 standard deduction and represent additional qualifying deductions/exemptions. Cess is included in neither side of the break-even comparison; because the same 4% cess applies to both tax amounts under these assumptions, the break-even point is unchanged.

These are illustrations, not recommended deduction targets. At salary levels up to ₹12 lakh, the example assumes the resident qualifies for the new-regime rebate that brings the new-regime tax to nil. NRIs cannot claim Section 87A, so this table does not apply to them. The actual break-even point also changes with special-rate income, surcharge, other income, eligibility restrictions and the types of deductions/exemptions available.

Are Income Tax Slabs Different for NRIs?

For ordinary income taxed at normal slab rates, an NRI generally uses the same slab structure as an individual who is not eligible for the resident senior-citizen thresholds. However, final tax liability may differ because some resident-only benefits are unavailable and some NRI income may be taxed at special rates.

• No Section 87A rebate: NRIs cannot claim the Section 87A rebate under either regime.

• No resident senior-citizen slab thresholds: The higher old-regime basic exemption thresholds for resident senior and super senior citizens do not apply to NRIs.

• Source and receipt matter: Check whether income is received, accrues, arises or is deemed to accrue or arise in India under the applicable provisions.

• Special tax rates may apply: Certain capital gains and other specified income can be taxed under provisions separate from ordinary slab rates.

• Deductions are provision-specific: Check each deduction’s eligibility and conditions rather than assuming that all resident deductions are available to an NRI.

What Income Is Taxable for NRIs in India?

An NRI may be liable to Indian tax on income received or deemed received in India, income accruing or arising or deemed to accrue or arise in India, and other amounts covered by the applicable provisions. The outcome depends on residential status, income source, place of first receipt, the relevant tax provisions and any available treaty relief.

Common examples of income that may be taxable in India include:

• Salary for services rendered in India, subject to the applicable rules and any relevant treaty relief.

• Rental income from property located in India.

• Capital gains on the sale of Indian property, shares, mutual funds or other Indian assets.

• Interest on NRO accounts and other taxable Indian-source interest.

• Business or professional income taxable in India under the applicable source and deemed-source rules.

Foreign income earned and first received outside India is generally outside the Indian tax net for a non-resident, but exceptions and deemed-source rules can apply. Check the actual facts and relevant provisions before concluding that income is not taxable in India.

Tax-Free Income Under Both Regimes

For eligible resident individuals

New regime: Total income up to ₹12 lakh may result in nil tax due to the Section 87A rebate, subject to the statutory conditions. For an eligible salaried individual, the ₹75,000 standard deduction can mean gross salary up to ₹12.75 lakh results in nil tax, assuming no special-rate income and that all relevant conditions are met.

Old regime: Total income up to ₹5 lakh may result in nil tax due to the Section 87A rebate. For an eligible salaried individual, the ₹50,000 standard deduction can mean gross salary up to ₹5.5 lakh results in nil tax, subject to conditions and other income or tax items.

For NRIs

New regime: The first ₹4 lakh of ordinary total income falls in the nil-rate slab. However, NRIs cannot claim Section 87A rebate. Eligible salary income may qualify for the standard deduction.

Old regime: The first ₹2.5 lakh of ordinary total income falls in the nil-rate slab for an NRI. NRIs do not receive the old-regime higher basic exemption thresholds for resident senior citizens, and they cannot claim Section 87A rebate.

A nil-rate slab and a nil final tax liability are not the same. Special-rate income, deductions, surcharge, cess and residential status can affect the final amount.

Common Tax-Regime Mistakes to Avoid

1. Assuming the new regime is always better without comparing both calculations.

2. Claiming Section 87A without confirming resident-individual eligibility and the relevant income conditions.

3. Applying resident senior-citizen slab thresholds to an NRI.

4. Claiming deductions that are unavailable under the chosen regime or to the taxpayer in question.

5. Applying ordinary slab rates to income subject to special tax rates.

6. Ignoring surcharge, marginal relief or 4% Health and Education Cess where applicable.

7. Applying FY 2025–26 rules to income earned from 1 April 2026 onward without checking the new tax-year framework.

Compare the regimes using the same income figures and retain documents supporting each deduction or exemption. For filing support, see the income-tax return glossary and the relevant official guidance.

Income Tax Calculation Examples

The examples below are illustrative, assume only ordinary income taxed at normal slab rates, and exclude surcharge. They include 4% Health and Education Cess where tax is payable. Actual results depend on individual facts, eligibility and the applicable rules.

Example 1: Resident salaried employee with limited deductions

Assume Arjun is an eligible resident individual with gross salary of ₹12 lakh. He has qualifying Section 80C payments of ₹1.5 lakh and qualifying Section 80D health-insurance premiums totalling ₹30,000 across eligible categories, within the applicable limits. Assume no other income or special-rate income.

The new-regime rebate eliminates the calculated slab tax because Arjun is assumed to be an eligible resident individual. If the same salary and assumptions applied to an NRI, the Section 87A rebate would not be available; the simplified new-regime tax would be ₹52,500 plus ₹2,100 cess, or ₹54,600.

Example 2: Salaried taxpayer with qualifying HRA and home-loan benefits

Assume Meera is a resident salaried individual with gross salary of ₹25 lakh, no special-rate income and no surcharge. For illustration, assume that her verified facts support ₹4 lakh of HRA exemption and ₹2 lakh of qualifying interest deduction for a self-occupied home under the old regime. Also assume qualifying Section 80C deductions of ₹1.5 lakh, Section 80D deductions of ₹50,000 and an eligible Section 80CCD(1B) deduction of ₹50,000.

The HRA amount must be calculated under the prescribed formula using actual salary, rent, location and other details. The home-loan interest deduction is subject to the applicable statutory conditions and limits. The example assumes all stated amounts qualify.

On these assumptions, the old regime is lower by ₹15,600. This is not a general rule: verify the actual HRA calculation, home-loan eligibility, deduction limits and supporting documents before relying on the comparison.

Special Tax Rates Not Covered by the Normal Slabs

Not all income is taxed using the ordinary slab table. Separate provisions may apply to specific income categories, including:

• Short-term or long-term capital gains on specified assets.

• Income from virtual digital assets.

• Lottery, game-show and similar winnings.

• Specified online-gaming winnings.

• Certain dividend or investment income, especially in cross-border situations.

The rate and calculation depend on the type of income, the relevant transaction dates, taxpayer status and any available treaty relief. Section 87A rebate cannot be used to eliminate tax on income chargeable at specified special rates. Refer to the applicable law and official guidance before estimating final tax.

Surcharge Rates for FY 2025–26

Surcharge is an additional charge on income tax when total income crosses the prescribed thresholds. The following table shows the general surcharge rates for individuals; special rules, marginal relief and income-specific caps may affect the result.

For specified capital gains and certain other income categories, the surcharge may be subject to a lower cap. Do not apply the general table mechanically to every type of income. Check the Income Tax Department’s surcharge guidance.

Health and Education Cess

Health and Education Cess is generally charged at 4% of income tax plus surcharge, if any. Calculate it after applying any available rebate and calculating applicable surcharge. If no income tax remains payable after a full rebate, cess on that income-tax amount will ordinarily also be nil; tax payable on special-rate income can still arise.

Rebate Under Section 87A for FY 2025–26

Important points:

• NRIs cannot claim a rebate under Section 87A.

• The rebate is subject to the statutory total-income and tax-computation rules.

• The rebate cannot be used against tax payable on income chargeable at specified special rates.

• A rebate reduces income tax; it is not a deduction from total income.

See the Income Tax Department’s Section 87A and resident-benefit guidance.

Official References

• Income Tax Department — Tax Rates and Computation

• Income Tax Department — Computation of Tax for an Individual

• Income Tax Department — Resident Benefits Allowable / Section 87A

• Income Tax Department — Deductions Allowable to Taxpayers

• Income Tax Department — Standard Deduction for Salaried Employees

• Income Tax Department — Surcharge

• Ministry of Finance / PIB — Income-tax Act, 2025 effective from 1 April 2026

The Bottom Line

For FY 2025–26, the new regime may be more suitable for eligible taxpayers with fewer deductions, while the old regime may be more competitive when substantial eligible exemptions and deductions lower taxable income. The right answer depends on an individual calculation—not a single deduction threshold.

NRIs should be especially careful: they cannot claim the Section 87A rebate or the higher old-regime basic exemption thresholds reserved for resident senior citizens. Determine which income is taxable in India, distinguish ordinary income from special-rate income, and check any applicable DTAA provisions before filing.

For support with NRI income-tax filing, TDS, capital gains or DTAA questions, contact Savetaxs.