Income Tax Slab and Rates - FY 2025-26 (AY 2026-27) | FY 2024-25 (AY 2025-26)

Introduction

Income tax is a direct tax levied by the Government of India on an individual's earnings based on a structured slab system. This progressive taxation ensures that higher earners contribute more to the economy while lower-income individuals benefit from tax exemptions or lower rates.

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The Indian tax system allows taxpayers to choose between two regimes:

New Tax Regime – Offers lower tax rates but does not allow deductions or exemptions.
Old Tax Regime – Provides various exemptions and deductions but has higher tax rates.

With the Union Budget 2025, the government has introduced significant revisions to the tax slabs under the New Regime, making it a more attractive option for many taxpayers. Let’s explore the latest tax slabs and understand their implications.

Income Tax Slabs for FY 2024-25 (AY 2025-26) – New Regime

The new tax regime is now the default choice unless taxpayers specifically opt for the old regime. One of the biggest updates in Budget 2025 is that income up to ₹12 lakh is tax-free. Below is the revised tax slab structure for FY 2024-25 (AY 2025-26):

Key Features of the New Regime:

Higher tax exemption: No tax on income up to ₹12 lakh.

Lower tax rates: compared to the old regime.

No deductions or exemptions: for investments like PPF, EPF, and housing loan interest.

Tax rebate under Section 87A: If total income does not exceed ₹7 lakh, taxpayers get a rebate of up to ₹25,000, making their tax liability zero.

Income Tax Slabs for FY 2024-25 (AY 2025-26) – Old Regime

The old tax regime remains unchanged from previous years. It allows taxpayers to claim deductions such as 80C, 80D, HRA, and home loan interest deductions, but tax rates are higher.

Key Features of the Old Regime:

• Allows standard deduction of ₹50,000.
• Permits deductions like 80C (₹1.5 lakh), 80D (health insurance), and home loan interest (₹2 lakh).
• Higher tax rates compared to the new regime.
• Surcharge & cess applicable for higher income brackets.

Which Tax Regime Should You Choose?

The decision depends on your financial situation:

• If you claim many deductions (like 80C, HRA, and home loan interest), the old regime may offer better savings.
• If you don’t have major deductions, the new regime provides lower tax rates and simplifies tax filing.
• For those earning up to ₹7 lakh, the new regime is more beneficial as they will pay zero tax due to the rebate.

Conclusion

The Union Budget 2025 has reshaped India's tax landscape by introducing higher exemptions and modified slabs under the new tax regime. With income up to ₹12 lakh tax-free, many taxpayers may find the new regime more favorable. However, individuals who benefit from multiple deductions might still prefer the old regime.

Before filing your tax returns, carefully evaluate both regimes and select the one that helps maximize your savings. Consult a tax expert if needed to make the best choice for your financial goals.