Income Tax Slabs and Rates for FY 2025-26 (AY 2026-27)

The Union Budget 2025 introduced significant changes to the income tax slabs under the new tax regime, offering substantial relief to middle-income taxpayers. Under the revised structure, individuals earning up to Rs. 12 lakh pay zero income tax, while the 30% tax rate now kicks in only above Rs. 24 lakh — a major shift from the earlier Rs. 15 lakh threshold.

This guide covers everything you need to know about income tax slabs and rates for FY 2025-26 (AY 2026-27), including the new tax regime slabs, old regime rates, Section 87A rebate, marginal relief, surcharge, tax savings breakdowns, and how to choose the right regime for your income level.

New Income Tax Slabs for FY 2025-26 (AY 2026-27)

The Union Budget 2025 revised the income tax slab structure under the new tax regime, reinforcing the government's focus on simplifying taxation and providing relief to middle-income taxpayers. Under this revised structure, income up to Rs. 4 lakh remains exempt from tax. The existing slabs continue to lower the overall tax burden and encourage wider adoption of the simplified tax regime, which remains the default option for taxpayers.

Here are the new income tax slabs for FY 2025-26 (AY 2026-27) under the new regime:

The enhanced tax rebate under Section 87A, which was increased in Budget 2025 from Rs. 25,000 to Rs. 60,000, continues in Budget 2026. As a result, resident individuals with taxable income up to Rs. 12 lakh pay zero income tax under the new tax regime. In addition, salaried taxpayers can claim a standard deduction of Rs. 75,000, effectively making income up to Rs. 12.75 lakh tax-free under the revised structure.

Further, the tax deduction limit for senior citizens has been doubled from Rs. 50,000 to Rs. 1 lakh, offering meaningful relief to elderly taxpayers and supporting post-retirement financial security.

According to the Finance Minister, these tax measures together result in the government foregoing nearly Rs. 1 lakh crore in direct tax revenue and around Rs. 2,600 crore in indirect taxes, reinforcing Budget 2025's focus on increasing disposable income while maintaining fiscal stability.

Income Tax Rates Under the New Regime – FY 2026-27 (AY 2027-28)

Under the new tax regime, individuals with income up to Rs. 12 lakh continue to enjoy complete tax exemption, making this structure highly beneficial for middle-income taxpayers. For salaried individuals, the tax-free limit extends further to Rs. 12.75 lakh, after factoring in the Rs. 75,000 standard deduction. These measures are aimed at boosting disposable income and simplifying tax compliance.

Once an individual's taxable income exceeds Rs. 12 lakh, the following tax rates apply:

This marks a significant departure from the earlier tax regime, where income above Rs. 15 lakh was taxed at a flat 30% rate. Under the revised slabs, individuals earning between Rs. 12 lakh and Rs. 24 lakh enjoy meaningful tax savings, making the new regime more appealing for middle- and upper-middle-income taxpayers. The updated structure also supports the government's objective of simplifying taxation, lowering the compliance burden, and extending financial relief to a wider taxpayer base.

Tax Savings Breakdown Under the New Regime

To understand how the revised income tax slabs translate into actual rupee savings, let us compare the tax payable under the existing slabs with the proposed (Budget 2025) slabs for various income brackets.

Existing Tax Savings

Proposed Tax Savings (Budget 2025)

Net Benefit: Individuals earning Rs. 15 lakh annually enjoy a net tax reduction of Rs. 35,000, even before accounting for the Section 87A rebate.

Income Tax Changes Effective from 1st April 2026

The Union Budget 2025 retained and strengthened the reforms introduced in Budget 2025, with a continued focus on simplifying tax compliance, improving transparency, and providing relief to taxpayers. Effective from 1st April 2026 (FY 2026-27), these measures benefit individuals, businesses, and investors by lowering tax liability, easing compliance, and expanding exemptions. Below is a consolidated overview:

1. Retention of the New Tax Regime

• Income up to Rs. 12 lakh remains tax-free under the new tax regime.
• For salaried individuals, the effective tax-free limit increases to Rs. 12.75 lakh after the Rs. 75,000 standard deduction.

2. Section 87A Rebate

• The enhanced rebate continues at Rs. 60,000, ensuring zero tax liability for resident individuals with taxable income up to Rs. 12 lakh.

3. Income Tax Slabs Under the New Regime

4. Higher Deduction for Senior Citizens

• The deduction limit has been increased from Rs. 50,000 to Rs. 1 lakh, offering additional relief to elderly taxpayers.

5. Standard Deduction for Salaried Individuals

• The standard deduction continues at Rs. 75,000, further reducing taxable income.

6. Simplification of Compliance

• Filing processes, return timelines, and TDS/TCS provisions are streamlined under the Income Tax Act, 2025, improving ease of compliance.

7. Exemption for Interest Income

• Interest income exemptions under Section 80TTA and 80TTB continue, with limits of Rs. 50,000 for individuals and up to Rs. 1 lakh for senior citizens.

8. Continued Investment Deductions

• Deductions under Section 80C, 80D, and other eligible provisions remain available under the old regime, allowing taxpayers to reduce taxable income.

9. Impact on Middle- and Upper-Middle-Income Earners

• Individuals earning between Rs. 12 lakh and Rs. 24 lakh benefit from lower tax liability compared to the earlier regime, improving disposable income.

10. Foregone Revenue

• The government estimates a revenue foregone of nearly Rs. 1 lakh crore in direct taxes and around Rs. 2,600 crore in indirect taxes due to these measures.

11. Option to Choose the Old Regime

• Taxpayers may still opt for the old tax regime if it is more beneficial, ensuring flexibility.

12. Relief for Senior Citizens and Retirees

• Higher deductions and continued interest exemptions support post-retirement financial security.

13. Incentives for Savings and Growth

• Tax benefits continue for long-term savings instruments, retirement plans, and infrastructure-linked investments, encouraging sustained capital formation.

Top 10 Key Highlights of Budget 2025-26

1. The Income Tax Act, 2025 is proposed to come into force from 1 April 2026, aiming to simplify tax laws and improve compliance.
2. Certain TDS and TCS provisions were rationalised to ease compliance, particularly for individuals and businesses.
3. Public capital expenditure was raised to a record Rs. 12.2 lakh crore for FY 2025-26, reinforcing infrastructure-led growth.
4. The Budget reiterated the government's focus on expanding rail connectivity, including upgrades and future high-speed rail development.
5. Continued support was announced for semiconductor manufacturing and electronics ecosystems to strengthen domestic capabilities.
6. MSMEs and manufacturing sectors received targeted credit, infrastructure, and policy support to boost competitiveness and job creation.
7. Investments were announced in education, skilling, and women-centric initiatives, including hostels and skill development programmes.
8. Agriculture and rural development saw increased allocation for irrigation, storage, rural assets, and productivity enhancement.
9. Defence expenditure was increased with a strong emphasis on indigenisation and advanced manufacturing.
10. The Budget highlighted critical minerals and technology supply chains to support clean energy, electronics, and strategic sectors.

Budget 2025 Highlights: Key Announcements and Major Changes

What Is the Proposed Change in STT Rules?

The Union Budget 2025 proposes a revision in Securities Transaction Tax (STT) applicable to equity derivatives, aimed at moderating excessive speculative activity in the futures and options segment.

Key proposed changes include:

• STT on equity futures is proposed to be increased from 0.02 percent to 0.05 percent of the transaction value.
• STT on equity options is proposed to be increased, including:
  • Higher STT on the option premium, and
  • Higher STT when options are exercised, with the effective rate rising to around 0.15 percent.

Intent of the change:

• To curb high-frequency speculative trading in derivatives.
• To improve tax parity and stability in capital markets.
• To increase revenue without impacting long-term investors, as STT on cash equity delivery trades remains unchanged.

Multiple TCS Rates Removed Under Budget 2025

Under the Union Budget 2025, the government has rationalised the Tax Collected at Source (TCS) framework by removing multiple rate structures and moving towards simpler, uniform rates across select transactions. The objective is to reduce compliance complexity and ease cash-flow pressure on taxpayers.

Key changes include:

• Overseas tour programme packages: The earlier multi-rate structure has been removed and replaced with a single flat TCS rate of 2 percent, eliminating threshold-based differentiation.
• Liberalised Remittance Scheme for education and medical purposes: TCS has been standardised at 2 percent, replacing higher and varied rates applicable earlier.
• Specified goods and commodities: Certain items such as alcoholic liquor, scrap and selected minerals now attract a uniform TCS rate of 2 percent, instead of multiple rates.

Impact of the change:

• Simplifies the TCS structure and compliance.
• Reduces upfront tax collection on eligible transactions.
• Improves liquidity for individuals and businesses without affecting final tax liability, as TCS remains adjustable against total tax payable.

ITR Filing and Revised Return Deadlines in Budget 2025-26

Under Union Budget 2025-26, the government has revised due dates for filing Income Tax Returns (ITR) and extended the deadline for filing revised returns, with the aim of easing compliance and reducing peak-season congestion.

New Due Dates for Filing ITR

For individual taxpayers (ITR-1 and ITR-2) whose accounts do not require audit, the due date to file the original ITR remains 31st July 2026.

• For non-audit business taxpayers and trusts whose accounts are not required to be audited, the due date has been extended from 31st July to 31st August 2026.
• For audit cases and companies, the due date continues to be 31st October 2026, and for cases involving transfer pricing provisions, the due date is 30th November 2026 under the revised framework.

Revised Return Filing Deadline

The period in which a taxpayer can file a revised return has been extended from nine months to twelve months from the end of the relevant tax year. This means the last date to file a revised ITR for the financial year 2025-26 (assessment year 2026-27) will be 31st March 2027 instead of the earlier 31st December 2026.

Penalty on Late Revised Returns

A nominal fee has been introduced for filing a revised return after the earlier nine-month period. A fee of Rs. 5,000 applies if total income exceeds Rs. 5 lakh, and Rs. 1,000 if total income is below Rs. 5 lakh.

Tax Benefit Comparison for Taxpayers (0–50 Lakhs)

The following table illustrates the tax benefit available under the new tax regime slabs compared to the existing rates across different income levels. This comparison includes the calculation under both existing and proposed rates, rebate advantage, and the overall benefit:

Resident individuals with an income exceeding Rs. 12 lakh will be eligible for marginal relief.

What Is Marginal Relief?

Marginal relief is a tax benefit provided to individuals whose income slightly exceeds Rs. 12 lakh. Without this relief, such taxpayers would face a significantly higher tax liability due to slab-based taxation. For instance, while an individual earning exactly Rs. 12 lakh pays no tax, someone earning just above this threshold could face a sudden tax burden.

To prevent this sharp jump, marginal relief ensures that the additional tax payable does not exceed the excess income over Rs. 12 lakh. In this case, if the tax liability based on slabs is Rs. 61,500, but the individual's income exceeds Rs. 12 lakh by only a small margin, they would only be required to pay tax equivalent to the excess amount. For example, if their income is Rs. 12,10,000, they would pay Rs. 10,000 in tax, ensuring their take-home income remains fair.

How Is Marginal Relief Computed?

The marginal relief is computed in the following manner:

Step-by-step calculation:

1. Compute Tax as per Slab Rates: The tax liability is first calculated based on the applicable slab rates. For instance, if the total income is Rs. 12,10,000, the total computed tax as per slabs is Rs. 61,500.
2. Tax on Income up to Rs. 12,00,000: Since income up to Rs. 12 lakh qualifies for the Section 87A rebate, the tax payable on this portion is NIL.
3. Comparison of Tax Liability: The tax liability without applying marginal relief is Rs. 61,500. This is then compared with the excess income over Rs. 12 lakh, which in this case is Rs. 10,000 (Rs. 12,10,000 – Rs. 12,00,000).
4. Calculating Marginal Relief: Marginal relief is determined by subtracting the excess income (Rs. 10,000) from the initially computed tax liability (Rs. 61,500).
5. Relief Amount: The relief granted under marginal relief is Rs. 51,500 (Rs. 61,500 – Rs. 10,000).
6. Final Tax Payable: After applying marginal relief, the final tax payable is Rs. 10,000 (Rs. 61,500 – Rs. 51,500).

What Is an Income Tax Slab?

In India, individuals are required to pay income tax according to the tax slab their income falls within. These slabs delineate various income ranges, each associated with a specific tax rate, which escalates as income rises. This slab-based approach was devised to establish an equitable tax framework across the country. Adjustments to the income tax slabs are typically made during the budget announcements. Income tax is categorised into three distinct age-based groups:

• Individuals younger than 60 years.
• Senior citizens aged between 60 and 80 years.
• Super senior citizens aged over 80 years.

Features of the New Tax Regime: FY 2025-26 (AY 2026-27)

The new tax regime introduces significant changes for taxpayers, offering revised exemption limits and rebates while simplifying the tax structure. Below are its key features:

• Default tax regime – The new tax regime remains the default option, but individuals can opt for the old tax regime in any financial year, provided they do not have business income.
• Higher basic exemption limit – Currently set at Rs. 3 lakh, the basic exemption limit will be increased to Rs. 4 lakh from April 1, 2025 (FY 2025-26), providing additional tax relief to all individual taxpayers.
• Enhanced tax rebate under Section 87A – At present, taxable incomes up to Rs. 7 lakh qualify for a zero-tax rebate. From FY 2025-26, this limit will increase to Rs. 12 lakh, ensuring no tax liability up to that amount.
• No change in highest surcharge rate – The highest surcharge rate of 25% on incomes exceeding Rs. 2 crore remains unchanged under Budget 2025, continuing the existing taxation structure for high-income earners.

These updates make the new tax regime more attractive, particularly for middle-income earners, by increasing exemptions and reducing overall tax liability.

Tax-Free Income Under the New Tax Regime (FY 2025-26)

In the Financial Year 2025-26, the Indian government has introduced significant changes to the new tax regime, enhancing the tax-free income threshold for individuals. The basic exemption limit has been raised to Rs. 4 lakh, providing immediate relief to taxpayers.

Moreover, the rebate under Section 87A has been increased to Rs. 60,000 for taxable incomes up to Rs. 12 lakh. This means that individuals earning up to Rs. 12 lakh will have their tax liability effectively reduced to zero.

For salaried employees, an additional standard deduction of Rs. 75,000 elevates the tax-free income threshold to Rs. 12.75 lakh. These adjustments aim to simplify the tax structure and enhance disposable income for middle-income earners.

How Will Income Up to Rs. 12 Lakhs Be Tax-Free?

Let us consider an example of an individual earning Rs. 12 lakh annually under the new tax regime:

• For income up to Rs. 4 lakh → Zero tax
• For income between Rs. 4 lakh and Rs. 8 lakh → Rs. 20,000 tax
• For income between Rs. 8 lakh and Rs. 12 lakh → Rs. 40,000 tax
• Total tax liability → Rs. 60,000

However, under the new tax regime, the enhanced Section 87A rebate eliminates the entire Rs. 60,000, making the final tax payable zero for individuals earning up to Rs. 12 lakh. In contrast, under the old tax slab, an individual earning Rs. 12 lakh had to pay Rs. 1,72,500 in taxes.

More Examples

• For individuals earning Rs. 15 lakh annually – The new tax regime imposes a Rs. 1,40,000 tax, compared to Rs. 2,62,500 under the old regime, resulting in a saving of Rs. 1,22,500. This provides significant relief for middle-income earners.
• For individuals earning Rs. 25 lakh annually – The new tax regime requires them to pay Rs. 4,40,000, compared to Rs. 5,62,500 under the previous system. This leads to a tax saving of Rs. 1,22,500, increasing disposable income and encouraging investments.

These revised slabs offer notable tax benefits, making the new tax regime a more attractive option for taxpayers.

Understanding Income Tax Scenarios in the New Regime – FY 2026-27 (AY 2027-28)

The new tax regime introduces structured tax slabs, providing clarity on how income tax is calculated based on taxable income. Below are three different scenarios demonstrating tax liability and rebate eligibility.

Scenario 1 – Income Rs. 11.5 Lakh (Less than Rs. 12 Lakh)

• Since your taxable income is below Rs. 12 lakh, you qualify for the full Section 87A rebate.
• Total tax payable = Rs. 0

Scenario 2 – Income Rs. 12.75 Lakh (Between Rs. 12 Lakh – Rs. 12.75 Lakh)

• After availing the Rs. 75,000 standard deduction, taxable income reduces to Rs. 12 lakh.
• This ensures you still qualify for the 100% rebate, leading to zero tax liability.
• Total tax payable = Rs. 0

Scenario 3 – Income Rs. 13 Lakh (More than Rs. 12.75 Lakh)

• Since income exceeds Rs. 12.75 lakh, the rebate is no longer available.
• Taxable income after standard deduction = Rs. 13 lakh – Rs. 75,000 = Rs. 12.25 lakh
• Tax Calculation:
  • Rs. 0 – Rs. 4 lakh → No tax
  • Rs. 4 lakh – Rs. 8 lakh → 5% on Rs. 4 lakh = Rs. 20,000
  • Rs. 8 lakh – Rs. 12 lakh → 10% on Rs. 4 lakh = Rs. 40,000
  • Rs. 12 lakh – Rs. 12.25 lakh → 15% on Rs. 25,000 = Rs. 3,750
• Total tax before marginal relief = Rs. 63,750
• With marginal relief, applicable tax liability = Rs. 25,000 + cess

Key Takeaways

• Income up to Rs. 12.75 lakh qualifies for zero tax due to rebate.
• Income above Rs. 12.75 lakh is fully taxable from Rs. 4 lakh onwards.
• Basic exemption limit is Rs. 4 lakh, not Rs. 12 lakh.
• This applies only under the new tax regime.
• Capital gains (STCG & LTCG) are taxed separately.
• Applies to resident individuals only.

How Much Tax Will You Pay? Salary-Specific Breakdown

With the revised income tax slab and rates, individuals can benefit from significant tax savings. Below is a breakdown of tax liability at different income levels:

If Your Taxable Income Is Rs. 13 Lakh

• 15% tax on Rs. 12-13 lakh = Rs. 15,000
• Total tax payable = Rs. 75,000
• Previous tax liability = Rs. 1 lakh → Savings of Rs. 25,000

If Your Taxable Income Is Rs. 15 Lakh

• 15% tax on Rs. 12-15 lakh = Rs. 45,000
• Total tax payable = Rs. 1,05,000
• Previous tax liability = Rs. 1.40 lakh → Savings of Rs. 35,000

If Your Taxable Income Is Rs. 20 Lakh

• 20% tax on Rs. 16-20 lakh = Rs. 80,000
• Total tax payable = Rs. 2,00,000
• Previous tax liability = Rs. 2.90 lakh → Savings of Rs. 90,000

If Your Taxable Income Is Rs. 25 Lakh

• 30% tax on Rs. 24-25 lakh = Rs. 30,000
• Total tax payable = Rs. 3,30,000
• Previous tax liability = Rs. 4.40 lakh → Savings of Rs. 1,10,000

These revised slabs significantly lower the tax burden, providing greater savings for individuals under the new tax regime.

Does the New Tax Slab Apply to All Individuals?

No, the new tax slab applies only to individuals opting for the new tax regime. It is the default regime, but taxpayers can choose the old tax regime if they do not have business income. The revised income tax slab and rates are applicable to resident individuals and Hindu Undivided Families (HUFs) but do not cover businesses, partnerships, or corporate taxpayers. Additionally, capital gains (STCG & LTCG) are taxed separately and do not qualify for slab-based taxation. Individuals must carefully assess their deductions and exemptions before selecting the most beneficial tax regime for their financial planning.

Current Income Tax Slabs Under the New Regime – FY 2026-27 (AY 2027-28)

The new tax regime, retained as the default option for individual taxpayers, offers simplified calculations with fewer deductions. Taxpayers can still opt for the old regime if it is more beneficial, especially for senior citizens or those claiming multiple deductions.

The new tax regime slab rates for FY 2025-26 (AY 2026-27) have been retained from the previous year, continuing to provide significant tax relief for individual taxpayers compared to earlier slabs.

These rates apply uniformly to all taxpayers, regardless of age. This means that individuals below 60 years, senior citizens (60–80 years), and super senior citizens (80+ years) are all taxed under the same slabs in the new regime.

In contrast, the old tax regime still provides certain benefits for senior citizens, including higher basic exemption limits and additional deductions, which may make it preferable for some elderly taxpayers depending on their income and deductions.

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

The income tax slabs under the old regime remained unchanged for the financial year 2026-27 (Assessment Year 2027-28). Here's a summary:

Individuals below 60 years, HUFs, BOIs, and AOPs:

• Up to Rs. 2.5 lakh: Nil
• Rs. 2.5 lakh to Rs. 5 lakh: Up to 5% tax
• Rs. 5 lakh to Rs. 10 lakh: 20% tax
• Above Rs. 10 lakh: 30% tax

Senior Citizens (60–80 years):

• Up to Rs. 3 lakh: Nil
• Rs. 3 lakh to Rs. 5 lakh: Up to 5% tax
• Rs. 5 lakh to Rs. 10 lakh: 20% tax
• Above Rs. 10 lakh: 30% tax

Super Senior Citizens (80+ years):

• Up to Rs. 5 lakh: Nil
• Rs. 5 lakh to Rs. 10 lakh: 20% tax
• Above Rs. 10 lakh: 30% tax

You can use an income tax calculator to determine your tax liability for the financial year 2026-27. If you need assistance, you can consult a tax professional.

Old Tax Regime Slabs for Individual Taxpayers Below 60 Years

Under the old tax regime, individual taxpayers below 60 years enjoy a progressive tax structure. The first Rs. 2,50,000 of income is tax-free. Income between Rs. 2,50,001 and Rs. 5,00,000 is taxed at 5%, while income between Rs. 5,00,001 and Rs. 10,00,000 is taxed at 20% plus a flat rate of Rs. 12,500. Income exceeding Rs. 10,00,000 is taxed at 30% plus a flat rate of Rs. 1,12,500. A surcharge is applicable on higher incomes, ranging from 10% for income between Rs. 50,00,001 and Rs. 1,00,00,000 to 37% for income exceeding Rs. 5,00,00,000.

Old Tax Regime Slabs for Senior Citizens (60 to 80 Years)

The old tax regime offers some benefits for senior citizens. The basic exemption limit is increased to Rs. 3,00,000. Subsequently, income between Rs. 3,00,001 and Rs. 5,00,000 is taxed at 5%, and income between Rs. 5,00,001 and Rs. 10,00,000 is taxed at 20% with a flat rate of Rs. 10,000. Income exceeding Rs. 10,00,000 is taxed at 30% plus a flat rate of Rs. 1,12,500. A surcharge is applicable on higher incomes, with rates ranging from 10% for income between Rs. 50,00,001 and Rs. 1,00,00,000 to 37% for income exceeding Rs. 5,00,00,000. This structure provides slightly higher tax thresholds for senior citizens compared to those below 60 years.

Old Tax Regime Slabs for Super Senior Citizens (Above 80 Years)

For super senior citizens (aged 80 years and above), the old tax regime provides a higher tax exemption limit of Rs. 5,00,000. Income exceeding Rs. 5,00,000 is taxed at 20% up to Rs. 10,00,000 and 30% thereafter, with a flat rate of Rs. 1,12,500 applicable respectively. A surcharge ranging from 10% to 37% is levied on incomes exceeding Rs. 50,00,000, with the highest rate applicable for incomes exceeding Rs. 5 crores.

New Tax Slabs for Individual Taxpayers Below 60 Years (AY 2025-26)

The table showcases the income tax slabs and corresponding tax rates for different income levels in India. Individuals earning up to Rs. 3,00,000 are exempt from income tax. For income between Rs. 3,00,001 and Rs. 7,00,000, a 5% tax rate applies. As income increases, the tax rate also increases, reaching 30% for income exceeding Rs. 15,00,000. Surcharges are applicable on higher income levels, starting at 10% for income exceeding Rs. 50,00,000 and increasing to 25% for income exceeding Rs. 2,00,00,000.

New Tax Slabs for Senior Citizens (60 to 80 Years) – AY 2025-26

The table illustrates the income tax slabs and corresponding tax rates for different income levels in India. Individuals earning up to Rs. 3,00,000 are exempt from income tax. For income between Rs. 3,00,001 and Rs. 7,00,000, a 5% tax rate is applicable. As income increases, the tax rate also increases, reaching 30% for income exceeding Rs. 15,00,000. Surcharges are applicable on higher income levels, starting at 10% for income exceeding Rs. 50,00,000 and increasing to 25% for income exceeding Rs. 2,00,00,000.

New Tax Slabs for Super Senior Citizens (Above 80 Years) – AY 2025-26

The table outlines the income tax slabs and corresponding tax rates for different income levels in India for individuals above 80 years of age. Individuals earning up to Rs. 3,00,000 are exempt from income tax. For income between Rs. 3,00,001 and Rs. 7,00,000, a 5% tax rate is applicable. As income increases, the tax rate also increases, reaching 30% for income exceeding Rs. 15,00,000. Surcharges are applicable on higher income levels, starting at 10% for income exceeding Rs. 50,00,000 and increasing to 25% for income exceeding Rs. 2,00,00,000.

Old vs New Tax Regime: Side-by-Side Comparison

The income tax regime for individual taxpayers below 60 years offers two options: the old regime with deductions and exemptions, and the new regime with lower tax rates but no exemptions. The table below compares the tax slabs and rates under both regimes, highlighting their key differences:

Old vs New Income Tax Slabs for Individuals Below 60 Years

To make informed financial decisions, it's essential for individual taxpayers below 60 years to understand the differences between the old and new income tax slabs. The Indian government has introduced new tax regimes to simplify tax calculations, and it's crucial to assess how these changes impact your tax liability. This section provides a comparative analysis of the old and new income tax slabs and rates, enabling you to determine which regime offers the most advantageous tax outcome.

Old vs New Income Tax Slabs for Senior Citizens (60 to 80 Years)

To make informed financial decisions, it's essential for senior citizens (aged 60 to 80 years) to understand the differences between the old and new income tax slabs. The Indian government has introduced new tax regimes to simplify tax calculations, and it's crucial to assess how these changes impact your tax liability. This section provides a comparative analysis of the old and new income tax slabs and rates, enabling you to determine which regime offers the most advantageous tax outcome.

Old vs New Income Tax Slabs for Super Senior Citizens (Above 80 Years)

The Indian tax system provides specific benefits to super senior citizens (aged 80+). This section compares the old and new income tax slabs and rates for this demographic, enabling you to understand the differences and make informed decisions about which tax regime offers the most advantageous tax outcome.

Understanding the Revised New Tax Regime: What's Changed?

The Union Budget 2025 has introduced significant updates to the income tax regime, aimed at simplifying the tax structure and providing relief for certain categories. The revised income tax slabs bring expanded thresholds for certain categories, ensuring more taxpayers benefit from lower rates. These changes not only reflect the government's commitment to boosting disposable income but also encourage individuals to adopt the new tax regime. The following table depicts the changes made in the new regime to benefit the taxpayers:

The Interim Budget 2024-25 initially retained the same income tax slabs and rates for the Assessment Year 2025-26 as the previous year. However, the full Budget 2024 introduced changes, making the new tax regime the default option for individuals, HUFs, and other entities. While taxpayers have the option to choose the old regime with its deductions and exemptions, the new regime offers revised tax slabs and rates. For those with income from business or profession, the option to switch between regimes is available only once.

Surcharge Rates for AY 2026-27

The surcharge is an additional charge on the income tax amount. It is applicable only if your total income exceeds certain threshold limits. The surcharge rates are as follows:

Surcharge Rates for Individuals, HUFs, AOPs, BOIs, and Artificial Juridical Persons

Note:

• Rebate under Section 87A is available.
• Health and Education Cess is applicable.
• The enhanced surcharge of 25% and 37% is not levied on income taxable under sections 111A, 112, 112A, and dividend income. For such cases, the maximum surcharge rate is capped at 15%, except under sections 115A, 115AB, 115AC, 115ACA, and 115E.

Standard Deduction for FY 2025-26 (AY 2026-27)

The Union Budget 2025 continues the standard deduction for salaried individuals and pensioners at Rs. 50,000 for AY 2027-28 under the old regime. Under the new regime, the standard deduction stands at Rs. 75,000 — the same level that has been in force since it was enhanced in earlier budgets.

Since the standard deduction is available to all eligible taxpayers regardless of income level, it provides direct tax relief without requiring any tax-saving investments.

For individuals in the highest 30 percent tax slab, this translates into tax savings of up to Rs. 15,000 (excluding cess) purely through the standard deduction.

Eligibility

The standard deduction is available to:

• Salaried employees (both government and private sector)
• Pensioners receiving pension income

It is not available to self-employed individuals, freelancers, or taxpayers whose income is solely from business or profession.

How It Works

The standard deduction is a flat reduction from gross salary or pension income. No bills, receipts, or proof of expenditure is required. It is automatically applied while computing taxable income. Under the new tax regime, the Rs. 75,000 standard deduction is one of the few deductions still available, making it particularly valuable for salaried taxpayers who opt for the simplified structure.

Section 87A Rebate: How It Works

Section 87A of the Income Tax Act provides a direct rebate on tax liability for resident individuals whose taxable income falls below a specified threshold. Here's how it works under both regimes for FY 2025-26:

New Tax Regime

• Eligibility: Resident individuals with taxable income up to Rs. 12 lakh
• Maximum rebate: Rs. 60,000
• Effect: Tax liability becomes zero for income up to Rs. 12 lakh
• For salaried individuals: After Rs. 75,000 standard deduction, income up to Rs. 12.75 lakh results in zero tax

Old Tax Regime

• Eligibility: Resident individuals with taxable income up to Rs. 5 lakh
• Maximum rebate: Rs. 12,500
• Effect: Tax liability becomes zero for income up to Rs. 5 lakh

Important Points

• The rebate is available only to resident individuals — NRIs, HUFs, companies, and firms are not eligible.
• The rebate is applied after calculating tax on slab rates but before adding cess.
• Section 87A rebate is not applicable on income taxed at special rates, such as long-term capital gains under Section 112A (LTCG at 12.5% above Rs. 1.25 lakh) or short-term capital gains under Section 111A (STCG at 20%).
• If taxable income exceeds the threshold by even Rs. 1, the entire rebate is lost — however, marginal relief provisions ensure that the additional tax does not exceed the income above the threshold.

Old Tax Regime vs New Tax Regime: Which One Should You Choose?

Choosing between the old and new tax regime depends on your income level, the deductions you can claim, and your financial planning strategy. Here's a quick guide:

Choose the New Tax Regime if:

• You do not have significant tax-saving investments (PPF, ELSS, NPS, etc.)
• Your income is up to Rs. 12.75 lakh (salaried) and you want zero tax liability
• You prefer a simpler tax structure without tracking multiple deductions
• You earn between Rs. 12 lakh to Rs. 24 lakh and want to benefit from the wider slab range
• You are a young professional or early-career earner without substantial deductions

Choose the Old Tax Regime if:

• You have substantial deductions under Section 80C (up to Rs. 1.5 lakh), 80D (health insurance), home loan interest (Section 24), HRA exemption, and LTA
• Your total deductions exceed Rs. 3–4 lakh, which can significantly reduce your taxable income
• You are a senior citizen who benefits from the higher basic exemption limit and additional deductions like Section 80TTB
• You have a home loan with significant interest payments

General Rule of Thumb

For most taxpayers earning up to Rs. 15 lakh with limited deductions, the new tax regime is generally more beneficial. For those with income above Rs. 15 lakh and substantial deductions (exceeding Rs. 3.75 lakh approximately), the old regime may still offer better savings.

It is advisable to compute your tax liability under both regimes before making a choice. The new regime is the default; to opt for the old regime, you must explicitly select it while filing your ITR.

Disclaimer: The information provided in this guide is for educational purposes only and should not be considered as professional tax advice. Tax laws and rates are subject to change. Readers are advised to consult a qualified tax professional or Chartered Accountant for personalised advice based on their specific financial situation. For the latest updates, refer to the official Income Tax Department website at incometax.gov.in.