Income Tax Slab for FY 2025-26: Overview of the New Tax Regime and Salary Tax Rates

The calculation of income tax in India is based on a slab system, which outlines different rates for various income ranges for the applicable assessment year. Each year, the Finance Minister announces adjustments to these slabs as part of the Union Budget. For the fiscal year 2025-26, the changes to the tax slabs under the new regime were announced by Finance Minister Nirmala Sitharaman during the Union Budget 2023.

Scroll down to discover the income tax slab rates for FY 2025-26. Additionally, you'll find key differences highlighted between the old and new tax regimes, helping you understand the updated fiscal policies and their implications on individual taxpayers.

Income Tax Slabs for FY 2025-26: Latest Guidelines and Rates

As an individual taxpayer, you will need to pay income tax based on the slab system applicable to you. By default, the new tax regime is in effect. Refer to the table below which outlines the default income tax slabs for FY 2025-26.

Here are the latest income tax slab rates following the recent budget announcement for FY 2025-26:

• Up to ₹3 lakh: Nil
• ₹3 lakh to ₹7 lakh: 5% on income exceeding ₹3,00,000
• ₹7 lakh to ₹10 lakh: ₹20,000 + 10% on income over ₹7,00,000
• ₹10 lakh to ₹12 lakh: ₹50,000 + 15% on income over ₹10,00,000
• ₹12 lakh to ₹15 lakh: ₹80,000 + 20% on income over ₹12,00,000
• Above ₹15 lakh: ₹1,40,000 + 30% on income over ₹15,00,000

As per the Union Budget effective from April 1, 2024, the basic income exemption limit under the new tax regime has been raised to ₹3 lakh. This is an increase from the previous limit of ₹2.5 lakh.

Income Tax Slab for FY 2024-25: Updates for the New Tax Regime

Under the new tax regime for FY 2024-25, the income tax slab rates have been standardized for all individuals, regardless of age. The following are the updated income tax slabs effective from April 1, 2024:

For income above ₹15 lakh: 30%

Income up to ₹3 lakh: 0%

₹3 lakh to ₹6 lakh: 5%

₹6 lakh to ₹9 lakh: 10%

₹9 lakh to ₹12 lakh: 15%

₹12 lakh to ₹15 lakh: 20%

This tax regime was announced in order to make the new tax system more appealing to every individual. It will reduce tax liabilities for middle-income families. 

Income Tax Slab FY 2025-26 for Senior Citizens

For the fiscal year 2025-26, under the new tax regime, there are no distinct income tax slabs specifically for senior citizens; the same tax rates apply to all individuals regardless of age. Here’s how the tax slabs are structured for senior citizens under the old regime for FY 2025-26:

• Up to ₹3 lakh: Nil
• ₹3 lakh to ₹5 lakh: 5% of the total income exceeding ₹3 lakh
• ₹5 lakh to ₹10 lakh: 20% of the total income exceeding ₹5 lakh, plus ₹12,500
• Above ₹10 lakh: 30% of the total income exceeding ₹10 lakh, plus ₹1,12,500

Income Tax Slab FY 2024-25 for Super Senior Citizens

The table below outlines the income tax slabs for the fiscal year 2024-25 for super senior citizens (individuals aged above 80) under the old tax regime:

• ₹0 to ₹5 lakh: Nil
• ₹5 lakh to ₹10 lakh: 20% of the total income that exceeds ₹5 lakh
• Above ₹10 lakh: 30% of the total income that exceeds ₹10 lakh, plus ₹1,00,000

These tax slabs are designed to provide relief to super senior citizens by recognizing the financial challenges that may come with advanced age.

Note that for both tax regimes, a health and education cess of 4% is charged on the income tax payable. Additionally, a surcharge is applicable on higher income slabs: for individuals earning more than ₹50 lakh, the surcharge rates vary depending on the income bracket. This adds an additional tax on top of the base income tax rate, intended to help fund health and education initiatives within the country.

Deductions & Exemptions Under the New Tax Regime for FY 2025-26

Following the 2025 Budget updates, the new tax regime includes specific deductions and exemptions aimed at providing financial relief and incentives to taxpayers. Here’s a detailed overview:

1. Standard Deduction: A standard deduction of ₹50,000 is available, introduced in the 2023 Budget.
2. Conveyance Allowance: Employees can claim exemptions for conveyance allowances received as part of employment, specifically for expenses incurred.
3. Agniveer Corpus Fund Contributions: Contributions to the Agniveer Corpus Fund u/s 80CCH(2) are deductible, as introduced in the 2023 Budget.
4. Transport Allowances for Specially-Abled Individuals: Exemptions for transport allowances provided to specially-abled employees.
5. Gifts: Tax exemptions are available for gifts up to ₹5,000.
6. Incentives for Official Purposes: Incentives received for official duties are exempt from tax.
7. Travel Compensation: Compensation received for travel expenses related to tours or transfers is exempt.
8. Employer Contributions: Contributions by employers to NPS, EPF, and superannuation funds are deductible under Section 80CCD(2).
9. Family Pension Income Deduction: Deduction for family pension income is allowed under Section 57(iia), as outlined in the 2023 Budget.
10. Home Loan Interest (Let-Out Property): Interest on a home loan for let-out property can be deducted under Section 24.
11. Exemptions for Gratuity, Voluntary Retirement, and Leave Encashment: These are available under Sections 10(10), 10(10C), and 10(10AA) respectively.
12. Additional Employee Costs: Employers can claim deductions for additional employee costs under Section 80JJA.

Exemptions Omitted Under the New Tax Regime for FY 2025-26

The new tax regime, introduced to simplify the income tax structure, has omitted nearly 70 exemptions and deductions previously available under the old regime. Here’s a summary of some key exemptions and deductions that you cannot claim under the new tax regime:

1. Professional Tax and Entertainment Allowance on Salaries: These are no longer deductible.
2. Deductions under Section 80TTA and 80TTB: These concerning interest on savings accounts and interest income for senior citizens, respectively, are not claimable.
3. Minor Child Income Allowance, Helper Allowance, and Children’s Education Allowances: These specific allowances are omitted.
4. Leave Travel Allowance (LTA): No longer exempt under the new regime.
5. Special Allowances under Section 10(14): Various job-related allowances that were exempt are now taxable.
6. Chapter VI-A Deductions: Most deductions under this chapter, like those under Section 80C for investments, 80D for medical insurance, and 80E for education loans, are omitted, except for few like Section 80JJAA and Section 80CCD(2) related to employment generation and NPS employer contributions.
7. Donations: Any contributions made to political parties, trusts, or charities, which previously might have offered tax deductions, are no longer deductible.
8. Perks or Miscellaneous Allowances: This includes any exemption or deduction on perks such as food allowances which are now taxable.
9. Employee Contributions to NPS: Contributions made by employees to their National Pension System accounts are not deductible under the new regime.
10. Interest on Housing Loans: Under Section 24, interest on housing loans for self-occupied or vacant property, which was previously deductible, is now omitted.
11. Deduction of Entertainment Allowance: Previously available under Section 16 for government employees, now omitted.

Income tax slab for FY 2025-26- Old Tax Regime

For HUFs, Individuals, and NRIs:

• Up to ₹2,50,000: 0% (No tax)
• From ₹2,50,001 to ₹5,00,000: 5%
• From ₹5,00,001 to ₹10,00,000: 20%
• Above ₹10,00,000: 30%

For Senior Citizens (aged 60 years and above but less than 80 years):

• Up to ₹3,00,000: 0% (No tax)
• From ₹3,00,001 to ₹5,00,000: 5%
• From ₹5,00,001 to ₹10,00,000: 20%
• Above ₹10,00,000: 30%

For Super Senior Citizens (aged 80 years and above):

• Up to ₹5,00,000: 0% (No tax)
• From ₹5,00,001 to ₹10,00,000: 20%
• Above ₹10,00,000: 30%

Differences Between The New Tax Regime & The old Tax Regime

Default Tax Regime: The new tax regime is now the default for filing income tax returns. However, taxpayers have the option to choose the old regime each year based on their financial preference.

Tax Rebates and Exemptions: The new regime has not introduced several new deductions and exemptions; rather, it is characterized by the removal of most exemptions and deductions to simplify the tax structure. The rebate under Section 87A has indeed been modified to cover taxable income up to ₹7 lakh, offering a tax rebate of ₹25,000, effective from FY 2023-24.

Income Eligibility for Tax Rebate: Under the new tax regime, individuals earning up to ₹7 lakh, after considering the rebate and deductions, effectively pay zero tax if their total income does not exceed this amount. This is an extension from the previous ₹5 lakh cap under the old regime.

Surcharge Rates: The highest surcharge rate under the new regime has been reduced from 37% to 25%, which applies to higher income brackets.

Basic Exemption and Slabs: The basic exemption limit has been increased from ₹2.5 lakh to ₹3 lakh. The number of tax slabs in the new regime has been simplified, which might differ slightly from the description of decreasing from 6 to 5 slabs in FY 2023-24.

Standard Deductions: A standard deduction of ₹50,000 is now applicable to salaried individuals and pensioners under the new regime, mirroring a feature from the old regime. Additionally, family pensioners can claim a standard deduction of ₹15,000.

Differences in Deductions and Exemptions: The old tax regime allows for various deductions such as those under Section 80C (investments, insurance, tuition fees, etc.), HRA (House Rent Allowance), and LTA (Leave Travel Allowance), which can significantly reduce taxable income. These are largely unavailable in the new tax regime, which prioritizes simplicity and fewer exemptions.

Conclusion

From the above piece of information, it is evident that the Government of India has introduced certain changes to the existing income tax slab. In comparison to previous tax, there are almost 70 exclusions or deductions to help in the reduction of taxable income and income tax liability. So before opting for the new tax slab, it is imperative to keep certain conditions in mind.