New Income Tax Slab Explained: What You Need To Know For
AY 2025-26
Table of Contents
- Jaro Education
- 12, March 2025
- 11:00 am
New Income Tax Slab Updates for 2025-26
The changes were made to new income tax slabs in India under the new tax regime by Union Budget Income Tax 2025 by Finance Minister Nirmala Sitharaman. The new income tax slabs under the new tax regime shall be effective from April 1, 2025, for the next financial year 2025-26. The budget income tax slabs in the new tax regime have undergone many changes.
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The proposed new income tax slabs in India under the new tax regime for FY 2025-26 are as follows:
| New Income Tax Slabs in India | Tax Rate |
|---|---|
| Rs 0- Rs 4 lakh | Nil tax |
| Rs 4 lakh and Rs 8 lakh | 5% |
| Rs 8 lakh and Rs 12 lakh | 10% |
| Rs 12 lakh and Rs 16 lakh | 15% |
| Rs 16 lakh and Rs 20 lakh | 20% |
| Rs 20 lakh and Rs 24 lakh | 25% |
| Above Rs 24 lakh | 30% |
The new income tax slabs in India under the new tax regime will give taxpayers a chance to save up to Rs 1.14 lakh in a financial year. The new tax regime shall continue to be the default tax regime.
Apart From Making Changes In Income Tax
“Apart from making changes in the new income tax slab, tax rebate under Section 87A is likely to increase up to Rs 60,000. The increase in tax rebate under Section 87A will allow no tax to be paid for income up to Rs 12 lakh. Latest income tax laws provide for the levy of zero tax on net taxable incomes up to Rs 7 lakh and also provide for a rebate of any taxes payable, up to Rs 25,000.”
Impact of Budget Income Tax on Taxpayers in 2025-26
The new income tax slabs in India proposed under the new tax regime have raised the budget income tax basic exemption limit to Rs 4 lakh from the current limit of Rs 3 lakh.
The proposed new updates in the new tax scheme will increase its appeal to taxpayers, resulting in additional taxpayers being expected to pursue the new tax scheme forward.
The proposed changes have not impacted the new income tax slab in India introduced surcharge budget income tax slab for 2025-26.
An individual looking to stay in the old tax regime must opt for it during budget income tax return filing.
An individual taxpayer not having a business income is required to choose between the two regimes every financial year. Now, depending on the financial year, a taxpayer having business income would have to specifically apply for the old tax regime. Once this has been done, the taxpayer will have an option once and for a lifetime to switch to the new tax regime. Thereafter, no option to return to the old tax regime will be available.
In case of an Individual (resident or non-resident) or HUF or Association of Person or Body of Individual or any other artificial juridical person
Old vs. New Income TaxSlab
The new tax regime is the default tax regime for the Individual or HUF. Further, the benefit of the new tax regime has also extended to the Association of Persons (AOP)/Body of Individuals (BOI) and Artificial Juridical Person (AJP). If one wants to opt-out of the default new tax regime, he has to exercise the option under Section 115BAC(6).
The tax rates under the new tax regime are as under:
1. For Assessment Year 2024-2025
| Net Income Range | Tax Rate |
|---|---|
| Up to Rs. 3 lakh | Nil |
| From Rs. 3 lakh to Rs. 6 lakh | 5% |
| From Rs. 6 lakh to Rs. 9 lakh | 10% |
| From Rs. 9 lakh to Rs. 12 lakh | 15% |
| From Rs. 12 lakh to Rs. 15 lakh | 20% |
| Above Rs. 15 lakh | 30% |
2. For Assessment Year 2025-2026
| Net Income Range | Tax Rate |
|---|---|
| Up to Rs. 3 lakh | Nil |
| From Rs. 3 lakh to Rs. 7 lakh | 5% |
| From Rs. 7 lakh to Rs. 10 lakh | 10% |
| From Rs. 10 lakh to Rs. 12 lakh | 15% |
| From Rs. 12 lakh to Rs. 15 lakh | 20% |
| Above Rs. 15 lakh | 30% |
The slabs of the new tax regime for AY 25-26 as such provide an additional tax relief under the new tax regime vis-a-vis the previous one of AY 24-25, as can be seen quite clearly.
None, however, have any inkling that this particular slab of tax has been prescribed for every individual across age brackets be it under 60 years, between 60 and 80 years, or above 80 years, namely, super seniors.
The Domestic Company Income Tax Slab For 2025-26
(a) Surcharge: The income tax payable shall be enhanced by the surcharge by 7% of such tax for the case of total income exceeding one crore rupees but not exceeding ten crore rupees; above ten crore rupees, it shall be an increase by 12% of such tax. The surcharge shall be granted marginal relief, as under:
(i) Where the income exceeds Rs. 1 crore but does not exceed Rs. 10 crore, the total amount of income tax and surcharge payable shall not exceed the total amount of income tax on an income of Rs. 1 crore by more than the amount of income over Rs. 1 crore.
(ii) Where the income exceeds Rs. 10 crores, the total amount of income tax and surcharge payable shall not exceed the total amount of income tax payable on the total income of Rs. 10 crores by more than the amount of income that exceeds Rs. 10 crores.
(b) Health and education cess: The amount of income tax and the applicable surcharge shall be further increased by health and education cess calculated at the rate of four per cent of such income tax and surcharge.
| Minimum Alternate Tax (MAT) |
|---|
|
A domestic company shall be liable to pay Minimum Alternate Tax where tax payable by it on total income computed as per normal provisions of the Act is less than 15% of the 'book profit'. In such a case, 'book profit' is taken as the income of the company, which shall be liable to tax at the rate of 15% of such 'book profit'. However, MAT shall be levied at the rate of 9% (plus surcharge and cess as applicable) if the company is a unit of an International Financial Services Centre deriving its income solely in convertible foreign exchange. |
Special tax rates for a domestic company
The special Income-tax rates for domestic companies are given as under:
Domestic Company
♦ Where unmatter for the Section 115BA option 25%
♦ Where for the Section 115BAA option 22%
♦ Where for the Section 115BAB option 15%
Surcharge: A company opting for taxability under Section 115BAA or Section 115BAB shall be subject to a flat surcharge at the rate of 10%, irrespective of the amount of total income.
Health and education cess: This is imposed on the amount of income tax and the corresponding surcharge, computed at the rate of 4% of the income tax and surcharge.
MAT: Any domestic company opting for special provisions under Sections 115BAA & 115BAB is exempted from the provisions of MAT. However, there is no exemption in case MAT is opted under Section 115BA.
Local Authority Income Tax Slab For 2025-26
A local authority is liable for 30% income tax.
Add:
(a) Surcharge: The amount of income tax shall be subject to a surcharge increasing it by a surcharge of 12% of such tax where total income is over one crore rupee. However, the surcharge shall be eligible for marginal relief (the total income tax and surcharge payable shall not exceed the total income tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees, where income exceeds one crore rupees).
(b) Health and Education Cess: The amount of income tax, along with the applicable surcharge, shall be further increased by health and education cess determined at four per cent of that income tax and surcharge.
| Alternative Minimum Tax (AMT) |
|---|
| A Local Authority shall be subject to Alternative Minimum Tax if the same is found where the tax payable by it on the total income computed as per the normal provisions of the Act is less than the rate of eighteen point five per cent of the 'adjusted total income'. In such a case, the 'adjusted total income', which would be regarded here is the income of the firm, and it will pay 18.5% of such 'adjusted total income'. However, AMT shall be charged at the rate of 9% (along with applicable surcharge and cess) in case of a company, being a unit of an International Financial Services Centre and deriving its all income in convertible foreign exchange. |
What is an Income Tax Slab?
Tax Slab range of income levels at which an individual or corporation is taxed. In India, a budget income tax slab in India is progressive, making it very clear that the more amounts one earns, the more will be the new income taxed at a certain percentage. Typically, the tax slab is determined for different groups of individuals and is revised from time to time by the government.
Salary Income Tax Slabs for 2025-26
Well, even before the tax reforms have become effective, most taxpayers are eager to know how much actually would be overall tax benefits under the proposed changes in the new tax regime for next year (from April 1, 2025, at least).
The new tax regime calculator indeed reveals that the net tax saving under the proposed changes increases from ₹26,000 to ₹1.14 lakhs as one moves up from ₹13 lakhs to ₹24 lakhs income level. But the maximum tax saving on income above ₹24 lakh is ₹1.14 lakh only.
Taxpayers can check through the new tax regime calculator for their net tax savings that will come about on the proposed changes.
New Tax Regime Exemption List
New Tax Regime Key Features:
-
- Lower Tax Rates: The new tax regime has introduced reduced tax rates across the entire spectrum of incomes. Also, incomes between ₹5 lakh and ₹7.5 lakh are taxed at 10% while previously this was taxed at 20% in the earlier regime.
- No Deductions in the new tax regime or Exemptions: Under the new tax regime, one cannot avail of widely accepted deductions like those under Sections 80C, 80D, HRA, or interest on home loans.
- Tax Rebate under Section 87A: As in the old regime, the new tax regime also provides a rebate under Section 87A for individuals with income up to ₹5 lakh.
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- Simple Steps: Since there is no need for individuals to track and claim deductions in the new tax regime, it is simpler. In cases where you don’t have a significant amount of exemptions or deductions in the new tax regime, it may be better for you.
- Lower Tax Rates: If you do not engage in tax-saving investments, reduced tax rates in the new tax regime may look attractive to you.
New Tax Regime Calculator
What exactly is a budget income tax calculator, then?
It is a straightforward online tool that lets you know what your tax liability is according to some income details. Apart from that, it also helps you compare your taxes under the old and new tax regimes so that you can decide which is more favourable for you. We have changed this tool according to the changes in the current Union Budget Income Tax 2025 to help you decide your tax liability even earlier for better financial planning.
How to use the Tax calculator for the assessment year 2025-26 and also the financial year 2025-26?
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Steps for using a new tax regime calculator:
Step 1: Choose the financial year for which you want your taxes to be calculated.
Step 2: Select your age accordingly. Tax liability under the old regime differs based on the age groups.
Step 3: Click on ‘Continue’
Step 4: Here, enter the amount of salary; and salary income tax slabs before deducting various Head of Exemptions like HRA, etc. If an LTA deduction in the new tax regime applies to you, subtract it from your salary income tax slabs in India and input the net amount. There is a field available for exempt allowances. Enter the particulars if it applies to your case.
Step 5: With taxable salary income tax slabs: details such as interest income, rental income, interest paid on home loans borrowed for rented property, and interest paid on loans borrowed for self-occupied property have also to be entered.
Step 6: For Income from “Digital Assets”, enter the net income (Sale consideration (-) Cost of Acquisition).
Step 7: Click on ‘Continue’ again.
Step 8: Enter Your Tax Saving Investments under sections 80C, 80D, 80G, 80E, and 80TTA if applicable here.
Step 9: Hitting the ‘Calculate’ button will lead you to the computation of your liability. Through that, you can equip yourself to know what new taxes and old taxes mean to you.
For Example Salaried individuals and budget income tax calculation.
Income from salary = Basic salary + HRA + Special Allowance + Transport Allowance + any other allowance.
Some components of your salary income tax slabs in India are exempt from tax, for example, telephone bill reimbursements and leave travel allowances. The allowance that can be claimed under an exemption is HRA in case of living on rent and receiving it. Exemption for HRA can be calculated using this HRA new tax regime Calculator.
Apart from these exemptions, a 50000 standard deduction in the new tax regime is available in both the old and Rs.75,000 new regime respectively.
Higher Standard Deduction in FY 24-25 (AY 25-26)
In the Financial Year 24-25, higher standard deduction for AY 25-26 CA- The good news for salaried persons in the Union Budget Income Tax 2024 was that they would be entitled to a standard deduction in the new tax regime of INR 75,000 under AY new income tax slab for 2025-26. Up till AY 2024-2025, the fixed standard deduction was INR 50,000.
As standard deduction is applicable irrespective of the salary income tax slabs in India of the taxpayer, this additional 25,000 can save tax for holders of income above Rs. 7,500 (excluding cess) for the highest 30% tax bracket. It does not require tax-saving investment to avail. However, such benefits cannot be availed by self-employed individual taxpayers, self-employed professionals, and all non-individual taxpayers like HUFs.
Current Income Tax Slab: What to Expect in 2025-26?
Some modifications to the slab system currently in place for the new income tax slab for 2025-26 are anticipated. While tax rates would still presumably apply, the government will either increase the income limits of each slab or introduce a new set of tax rebates applicable to the middle class.
With inflation on the rise, the government may consider setting some measures for tax relief such as increasing basic budget income tax exemption limits or further reducing tax rates in a bid to rejuvenate the economy. Thus, you should stay abreast of developments in the new income tax slab in the Indian system to effectively plan your finances.
Final Thoughts on Income Tax Slabs for 2025-26
New Income tax slabs in India were expected to go on in progressive forms for the new income tax slab for 2025-26, making richer people pay for their services to the state in their income. This is because new tax structures have lower tax rates but deprive the facility of exemptions and deductions, while the old regimes leave scope for deductions in the new tax regime and apply higher tax rates.
To work out the situation well, study your finances, enumerate all the deductions in the new tax regime you can avail of, and do the math regarding the tax liability under both regimes. Knowledge of the latest income tax slabs in India, tax rebates, and exemptions should thus help you plan taxes for the new income tax slab for 2025-26.
Keep track of the updates for the budget’s income tax implications, and consult a tax advisor for the new rules that are likely to take effect within the next financial year.
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