- The Union Budget 2025 introduced new income tax slab rates under the new tax regime, effective for income earned in the financial year 2025–26
- The new tax regime will now be the default tax regime unless you choose the old tax regime
- There is an increase in the rebate under Section 156 from ₹25,000 to ₹60,000. As a result, individuals earning up to ₹12 lakh annually will now have no income tax liability under the new tax regime
In India, taxpayers get a choice between two tax regimes – the old regime and the new regime. Under the old tax regime, individuals have the option to claim various deductions and exemptions to reduce their taxable income. While this grants taxpayers the benefit of reducing their overall tax liability, the trade-off is a higher tax rate. The old regime classifies taxpayers into three distinct categories based on age – below the age of 60, between the ages of 60 and 80 and over the age of 80.
In contrast, the new tax regime offers a simplified approach. It allows certain deductions or exemptions. However, it imposes lower tax rates across tax slabs. Moreover, it is the same for all taxpayers, irrespective of age.
What is an income tax slab?
An income tax slab refers to the range of income levels into which taxpayers are categorised. Taxpayers are categorised into these slabs based on their annual income in a financial year. Each income tax slab has its own set of tax rates. The income tax you are required to pay is determined by the specific slab or range your total income falls into.
An overview of the latest income tax slabs for FY 2025–26 after the 2025 budget
Here's an overview of the changes made to income tax slabs for FY 2025–26 after the Budget 2025:
Income tax slab rates
The income tax slabs can differ per your chosen tax regime. Below is how this can differ:
Here are the updated income tax slabs for FY 2025-26 and AY 2026-27:
New Tax Regime
Old Tax Regime
| Income Slab | Tax rate |
|---|---|
| Up to ₹ 4,00,000 | Nil |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
How can income up to ₹ 12 lakh be made tax-free under the new tax regime?
Income up to ₹ 12 lakh can be made tax-free under the new tax regime for the FY2026. This can be done due to the increased rebate under Section 156 of The Income Tax Act, 2025. The rebate limit has been raised to ₹ 60,000, which allows taxpayers with income up to ₹ 12 lakh to enjoy a tax-free income.
For instance, suppose the gross income is ₹ 12 lakh, then as per the income tax slabs, total tax payable is calculated as follows:
| Gross income | ₹12,00,000.00 | ||
|---|---|---|---|
| Tax slab | Tax rate | Tax | |
| Up to ₹ 4 lakh | NIL | ₹ - | |
| ₹ 4 lakh - ₹ 8 lakh | 5% | ₹ 20,000.00 | |
| ₹ 8 lakh - ₹ 12 lakh | 10% | ₹ 40,000.00 | |
| Total tax payable | ₹60,000.00 | ||
Benefits of the new tax slab
Below are some benefits of the new tax slabs:
Simplified tax process
With the new tax regime being the default, the process of tax collection and filing has become more streamlined, making it easier for taxpayers to file their Income Tax Return (ITR).
Lower tax rates
With income up to ₹ 12 lakh being tax-free, the scope for savings is significantly higher, which reduces the overall tax burden for taxpayers.
Criteria for opting for a new tax regime
There are no specific criteria for opting for a new tax regime. However, as per the proposed changes under Budget 2025, the new tax regime will now be the default regime. This implies that all taxpayers automatically opt for the new tax regime unless they specifically choose the old tax regime.
Explore tax saving life insurance plans offered by ICICI Pru Life
Frequently Asked Questions
What is taxable income in India?
Taxable income in India refers to the income of an individual or an organisation on which the government levies tax. It is calculated as after deducting the deductions eligible under the Income Tax Act, 2025 from the income earned by an individual or an organisation.
Is the due date for filing tax return same for all taxpayers?
No, the due date for filing an income tax return is not the same for all taxpayers. In case of Individuals & HUF, who are not required to get audited under the Income Tax Act, 2025 the due date for filing the return is July 31st and for others, it is October 31st.
What is the time period considered for the purposes of income tax?
Income Tax is calculated on annual basis in India. It is calculated for the financial year starting from April 1 and ending on March 31.
Do I need to file Income Tax Return (ITR) if my annual income is below ₹ 2.5 lakh?
The taxation process is dependent on a number of factors. Please get in touch with a personal tax advisor.
Are there separate slab rates for males and females?
No. The slab rates for males and females are the same.
Are there separate slab rates for different age groups?
Yes. There are separate slab rates for taxpayers aged below 60 years, between 60 to 80 years (senior citizens) and above 80 years (super senior citizens) under old tax regime.
Will my income be taxed if I am an agriculturist?
The agricultural income is exempt from the income tax. However, if an agriculturist has non-agricultural income, then it would be taxable
