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

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Navigating taxation is now easier with the latest income tax slab updates for FY 2025-26 (AY 2026-27). These revised tax structures introduce new thresholds and lower rates, enabling significant tax savings. Whether you're a salaried individual, senior citizen, or business professional, understanding the new income tax slab is crucial for effective financial planning.

Budget 2025 Updates

The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, introduces a revamped new tax slab of income tax, effective from April 1, 2025. A key highlight is the increased rebate, making income up to INR 12,00,000 completely tax-free for resident individuals. Additionally, salaried taxpayers benefit from an INR 75,000 standard deduction, pushing the tax-free limit to INR 12,75,000. Lower tax rates for higher income brackets make the new tax regime income tax structure more attractive.

What is an Income Tax Slab?

An income tax slab defines specific income ranges taxed at progressive rates. This ensures fairness, with higher earnings attracting higher taxes. The income tax latest slab rates for FY 2025-26 reflect this principle while offering greater relief to taxpayers.

Latest Income Tax Slab After Budget 2025

The new tax regime slabs are structured for simplicity and savings. Here’s the breakdown:

For resident individuals, the rebate ensures zero tax liability up to INR 12,00,000, making the new tax slab of income tax highly beneficial.

Tax Slabs for Different Taxpayers in India

Tax slabs and rates vary depending on your category and chosen regime, old or new. Let’s explore how the income tax slab applies across different groups.

Income Tax Slabs for Individuals Below 60 Years

- New Tax Regime: Follows the slabs listed above, with benefits like the INR. 12,00,000 rebates.

Income Tax Slabs for Senior Citizens (60-80) Years

• New income tax regime structure applies uniformly without additional exemptions in new tax regime.
• The old regime provides a higher initial exemption threshold.

Income Tax Slabs for Super Senior Citizens (Above 80 Years)

- Tax rates remain the same as other individuals under the new tax regime.

Additional Tax Benefits for Senior Citizens

• The 2025 Budget has increased the TDS (Tax Deducted at Source) threshold for interest earned by senior citizens (excluding interest from securities) from INR 50,000 to INR 1,00,000. As a result, no TDS will be deducted on interest earned from fixed deposits, savings accounts, and similar sources if the total interest does not exceed INR 1,00,000. This change will take effect from April 1, 2025.
• Increased TDS threshold on rental income from ₹2.4 lakh to ₹6 lakh.
• Tax-free withdrawals from National Savings Scheme (NSS) accounts.

Income Tax for Businesses and Professionals

For those earning from business or profession, the new tax regime slabs apply by default, though you can opt for the old regime if deductions suit your financial plan better. Your taxable income slab is calculated based on net earnings, aligning with individual rates.

Income Tax Slab for NRIs

Non-resident Indians (NRIs) face taxation on Indian-sourced income using the same new tax regime slabs. However, they miss out on the INR. 12,00,000 rebates, meaning tax kicks in from the first rupee earned.

Tax Savings Breakdown Under the New Regime

The new tax regime redefines tax planning with fewer deductions but greater benefits. Here’s how it stacks up.

Existing Tax Savings

Under the old regime, deductions like Section 80C or HRA could shrink your taxable income slab significantly. However, this often-demanded detailed record-keeping and strategic investments.

Proposed Tax Savings

The new tax slab of income tax eliminates most exemptions in new tax regime but compensates with lower rates and a generous rebate. For example, a resident earning INR. 10,00,000 pays zero tax under the new regime, compared to a potential INR. 72,500 under the old one without hefty deductions. The benefits of new tax regime shine for those with minimal claims.

Salary-Specific Tax Breakdown

Salaried individuals enjoy an INR. 75,000 standard deductions under the new regime, pushing the salaried tax slab’s tax-free limit to INR. 12,75,000. Imagine earning INR. 12,75,000 annually, after the deduction, your taxable income drops to INR. 12,00,000, and the rebate wipes out your tax liability entirely. It’s a win for salaried taxpayers seeking simplicity.

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Understanding Income Tax Scenarios in the New Regime - FY 2025-26 (AY 2026-27)

Let’s bring the new tax regime slabs to life with real-world examples:

- Scenario 1: A 35-year-old resident earns INR. 15,00,000. Under the new regime, tax is calculated, but the rebate and lower rates reduce the burden significantly compared to the old regime with minimal deductions.

- Scenario 2: An NRI earns INR. 5,00,000 from India. Tax applies at 5% on INR. 1,00,000 (above INR 4,00,000), totalling INR. 5,000, no rebate applies here.

These scenarios underscore the need to pick a regime that fits your income profile. Tax slabs and rates vary depending on your category and chosen regime, old or new. To make the most of your tax benefits and savings, DBS Treasures provides exclusive wealth management solutions tailored for high-net-worth individuals.

Old vs New Tax Regime Slabs Comparison for FY 2025-26 (AY 2026-27)

Here’s a comparison of the old and new tax regimes for FY 2025-26 (AY 2026-27) to help you decide which suits your financial situation best. Understanding the key differences can help you optimize tax savings and simplify your filing process.

Conclusion

Understanding the latest income tax slabs for FY 2025-26 (AY 2026-27) is crucial for making informed financial decisions. The new tax regime offers lower rates and a higher rebate, simplifying tax planning while maximizing savings. Choosing the right tax structure can help you optimize your financial strategy, whether you're a salaried professional, senior citizen, or business owner./p>

To further strengthen your financial future, consider long term investment plans that align with your wealth-building goals. A well-structured investment plan, combined with tax-efficient strategies, can help you grow your savings while ensuring financial stability in the years to come.

*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.

Frequently Asked Questions

1. Is the new tax regime better for salaried individuals?

   The new tax regime benefits those who do not claim multiple deductions. It offers a standard deduction of INR 75,000, increasing the tax-free income threshold to INR 12,75,000 with rebates. However, individuals relying on exemptions like HRA or 80C may find the old regime more advantageous.

2. What exemptions are removed in the new tax regime?

   Key exemptions like HRA, LTA, and deductions under Section 80C (INR 1,50,000) are removed. Additionally, benefits like children’s education allowance and home loan interest deductions are excluded. The trade-off is lower tax rates and a rebate eliminating tax liability up to INR 12,00,000 for residents.

3. What deductions are available under the new tax regime?

   Salaried individuals can claim a standard deduction of INR 75,000, and NPS contributions under Section 80CCD(1B) up to INR 50,000 remain deductible. Other deductions under Sections 80C and 80D are not applicable.

4. What is the tax exemption in the new tax regime?

   Income up to INR 4,00,000 is tax-free, and residents get a rebate under Section 87A extending this relief to INR 12,00,000. Adding the INR 75,000 standard deduction raises the effective tax-free threshold to INR 12,75,000. NRIs do not qualify for this rebate.

5. Which is better, old or new tax regime?

   The old regime suits those claiming multiple deductions, while the new regime favours those seeking simplicity with lower tax rates and a INR 12,00,000 rebate. A salaried individual earning INR 10,00,000 pays no tax under the new regime, but high deduction users may prefer the old one.

6. Is 80C allowed in the new tax regime?

   No, Section 80C deductions are not available. Investments like PPF, ELSS, and life insurance premiums do not reduce taxable income. The new regime focuses on lower rates and a substantial rebate instead.

7. Is PPF exempted in the new tax regime?

   PPF interest and maturity remain tax-free, but contributions do not qualify for Section 80C deductions. The new regime offers broad tax relief rather than specific exemptions, making the old regime more beneficial for PPF users.

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