Income Tax Slabs & Rates for FY 2025-26 (AY 2026-27) - Complete Guide

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Income Tax Slabs and Rates for FY 2025-26 (AY 2026-27)

Introduction

Tax planning is essential for financial well-being, and understanding the latest income tax slabs and rates helps taxpayers optimize their savings. In Budget 2025, the Indian government revised tax slabs under the New Tax Regime, offering higher exemption limits and simplified structures. Let’s dive into the details.

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Key Highlights of Income Tax for FY 2025-26

New tax slabs for individuals and businesses
Standard deduction increased for salaried employees
Higher rebate under Section 87A
Tax exemptions and benefits remain unchanged for the Old Regime

Income Tax Slabs for FY 2025-26 (AY 2026-27)

New Tax Regime (Default)

Annual Income (₹)	Tax Rate
Up to ₹4 lakh	0%
₹4 lakh - ₹8 lakh	5%
₹8 lakh - ₹12 lakh	10%
₹12 lakh - ₹16 lakh	15%
₹16 lakh - ₹20 lakh	20%
₹20 lakh - ₹24 lakh	25%
Above ₹24 lakh	30%

Old Tax Regime (Optional)

Annual Income (₹)	Tax Rate
Up to ₹2.5 lakh	0%
₹2.5 lakh - ₹5 lakh	5%
₹5 lakh - ₹10 lakh	20%
Above ₹10 lakh	30%

Note: The Old Tax Regime allows deductions such as 80C, 80D, HRA, LTA, and home loan interest benefits, whereas the New Regime does not.

Which Tax Regime Should You Choose?

Choosing between the Old and New Regime depends on your income structure and deductions. Here’s a quick comparison:

Criteria	New Tax Regime	Old Tax Regime
Standard Deduction	₹75,000	₹50,000
80C Deductions	❌ Not Applicable	✅ Up to ₹1.5 lakh
HRA Exemption	❌ Not Applicable	✅ Available
Simplicity	✅ Easy	❌ Complex

Expert Tip: If you claim higher deductions (₹2 lakh+), the Old Tax Regime may be beneficial. Otherwise, the New Regime offers lower tax rates.

Actionable Insights for Taxpayers

1. Maximize Standard Deductions

Salaried individuals now get a ₹75,000 standard deduction in the New Tax Regime. Ensure this is factored into your calculations.

2. Claim 80C Benefits (Old Regime)

If opting for the Old Regime, invest in PPF, ELSS, NPS, or EPF to claim ₹1.5 lakh deduction under Section 80C.

3. Use Section 80D for Medical Insurance

Self, spouse & children: ₹25,000 deduction
Parents (above 60 years): ₹50,000 deduction

4. File Returns Early to Avoid Penalties

The ITR filing deadline is July 31, 2026. File early to avoid interest under Section 234A.

FAQs on Income Tax for FY 2025-26

1. What is the new basic exemption limit?

Under the New Regime, income up to ₹4 lakh is tax-free. In the Old Regime, it remains ₹2.5 lakh.

2. Can I switch between tax regimes?

Yes, salaried individuals can switch annually, while business owners must choose once and stick to it.

3. Are there any changes to HRA benefits?

HRA exemption is only available in the Old Regime. Under the New Regime, no HRA claims can be made.

4. What happens if I miss the tax filing deadline?

A late filing fee of ₹5,000 applies after July 31 under Section 234F.

5. Will I get a tax refund if I pay excess tax?

Yes, you can claim a refund while filing ITR via Form 16 and Form 26AS.

Final Thoughts

With increased exemptions and simplified tax slabs, taxpayers can now make better financial decisions. Assess your income, deductions, and tax planning strategy before choosing between the Old and New Regimes. Keep an eye on budget updates and consult a tax expert if needed.