New Tax Slabs FY 2025-26: Revised Tax Rates & Key Changes

Introduction:

The Union Budget 2025 has made significant changes in the New Tax Regime and understanding these changes becomes important for individuals for effective financial planning. The following is the comprehensive guide that delves into the latest tax slabs, compares the old and new regimes, and provides practical insights for taxpayers.

It is important to understand that the new Tax slabs are applicable from 1st April 2025 and thus available for Financial year 2025-26 i.e. Assessment Year 2026-27. 

Key amendments introduced under the new tax regime for FY 2025-26 (AY 2026-27)

1. New Income Tax Slabs:

• Rs 0 – Rs 4 lakh: Nil tax
• Rs 4 lakh – Rs 8 lakh: 5%
• Rs 8 lakh – Rs 12 lakh: 10%
• Rs 12 lakh – Rs 16 lakh: 15%
• Rs 16 lakh – Rs 20 lakh: 20%
• Rs 20 lakh – Rs 24 lakh: 25%
• Above Rs 24 lakh: 30%

2. No Tax upto 12 lakh Enhanced Tax Rebate (Section 87A): The tax rebate under Section 87A has been enhanced and increased to Rs 60,000. That results in zero tax liability for incomes up to Rs 12 lakh.

3. Increased Basic Exemption Limit: The basic exemption limit has been raised from 3 lakh to Rs 4 lakh.

4. Default Regime Status: Like last year, the new tax regime still remains the default option, but taxpayers can still opt for the old regime.

5. Standard deduction: The standard deduction for salaried individuals is 75,000 rupees. 

6. NPS deduction: The contribution to NPS tier 1 by the employer, is also eligible for deduction up to 14% of the basic salary.

Difference between New tax regime and Old tax regime for FY 2024-25 (AY 2025-26)