Income Tax Slabs 2025-26: Budget 2025 Updates
Introduction
The Union Budget 2025 has introduced significant changes to the income tax regime, benefiting millions of taxpayers. The most notable update is the increase in the tax-free income limit to Rs 12,00,000 under the new tax regime. For salaried individuals, this threshold is further extended to Rs 12,75,000, considering standard deductions and exemptions.

This article will provide an in-depth breakdown of the revised income tax slabs for FY 2025-26, their impact, and actionable insights to help you optimize your tax planning.
New Income Tax Slabs for FY 2025-26
The updated income tax slabs under the new regime are as follows:
Annual Income (Rs) | Tax Rate (%) |
Up to 12,00,000 | 0% (Tax-free) |
12,00,001 - 15,00,000 | 10% |
15,00,001 - 20,00,000 | 15% |
20,00,001 - 25,00,000 | 20% |
Above 25,00,000 | 30% |
For salaried individuals, an income of up to Rs 12,75,000 will be tax-free when including standard deductions.
Key Takeaways from Budget 2025 Tax Updates
Higher Tax-Free Income Limit: Increased from Rs 7,00,000 to Rs 12,00,000, significantly reducing tax liability.
Simplification of Tax Regime: More taxpayers are encouraged to shift to the new regime, which eliminates the need for multiple deductions.
Impact on Salaried Employees: The additional deductions for salaried individuals ensure more take-home salary.
Higher Disposable Income: Middle-class taxpayers will have more disposable income, boosting spending and investment.
Who Benefits the Most?
Salaried Professionals: Employees earning up to Rs 12,75,000 can now enjoy tax-free income, making the new regime more attractive.
Middle-Class Families: Increased exemptions allow more savings and investment opportunities.
Small Business Owners & Freelancers: Reduced tax burden means more capital retention for business growth.
Senior Citizens: Higher exemptions make retirement planning more effective and tax-efficient.
Comparison: New vs. Old Tax Regime
Feature | New Tax Regime | Old Tax Regime |
Standard Deduction | Yes | Yes |
Exemptions Allowed | No | Yes (HRA, 80C, etc.) |
Tax-Free Income | Rs 12,00,000 | Rs 5,00,000 |
Maximum Tax Rate | 30% (Above Rs 25L) | 30% (Above Rs 10L) |
Ease of Filing | High | Low |
Should You Switch to the New Regime?
If you claim multiple deductions (HRA, 80C, etc.), the old regime may still be beneficial.
If you prefer a hassle-free process, the new regime is more straightforward and tax-efficient.
Actionable Tax-Saving Strategies
Optimize Salary Structure: Utilize allowances and reimbursements to maximize exemptions.
Plan Investments Wisely: While the new regime lacks deductions, investing in long-term wealth-generating options (mutual funds, real estate) remains beneficial.
File Taxes on Time: Avoid penalties and maximize available benefits by filing before the deadline.
Frequently Asked Questions (FAQs)
1. What is the new income tax exemption limit for 2025-26?
Under the new tax regime, income up to Rs 12,00,000 is tax-free. For salaried employees, this extends to Rs 12,75,000 after standard deductions.
2. Is it mandatory to opt for the new tax regime?
No, taxpayers can choose between the old and new tax regimes based on their financial planning and deductions.
3. Does the new regime include Section 80C deductions?
No, the new regime does not allow deductions under 80C, 80D, or HRA. However, standard deductions for salaried individuals are still applicable.
4. How does this impact senior citizens?
With a higher exemption limit, senior citizens benefit from lower tax liabilities, ensuring better financial security post-retirement.
5. Will I save more under the new tax regime?
If you claim minimal deductions, the new regime is more beneficial. However, if you have multiple exemptions, the old regime may still be preferable.
Conclusion
The Budget 2025 tax reforms significantly ease the burden on taxpayers, particularly salaried professionals and the middle class. The increase in the tax-free limit to Rs 12,00,000 ensures higher savings and better financial flexibility.
If you are unsure about choosing the right regime, consult a tax expert to optimize your tax planning and maximize your savings.
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