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Budget 2025: FM Rejigs Income Tax Slabs; New Income Tax Slabs 2025-26 Vs 2024-25 Compared
Finance Minister Nirmala Sitharaman on Saturday announced big sop for the middle class and the salaried taxpayer. There will be no tax for income upto Rs 12 Lakh under New Tax Regime. Slabs and rates being changed across the board to benefit all tax-payers. New structure to substantially reduce taxes of middle class and leave more money in their hands, boosting household consumption, savings and investment, she said.
New income tax slabs regime 2025-26
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Finance Minister Nirmala Sitharaman has rejigged the new income tax slabs regime 2025-26 in the Union Budget 2025. The following are the new income tax slabs under the new tax regime.
2025-26 Income tax slabs (In Rs) Income tax rate (%)
Up to 4,00,000 = 0
4,00,001-8,00,000 = 5% 8,00,001-12,00,000 = 10% 12,00,001-16,00,000 = 15% 16,00,001-20,00,000 = 20% 20,00,001-24,00,000 = 24% Above 24,00,001 = 30%
Limited deductions compared to the old regime
The new tax regime introduced in FY 2020-21, the default tax regime, provides a basic exemption limit of Rs 3 lakh to all taxpayers, regardless of age. If a person's gross income for a fiscal year is less than Rs 3 lakh, they are exempt from paying taxes. The new tax regime offers limited deductions compared to the old regime.
Current income tax slabs 2024-25 under the new tax regime
Income tax slabs (In Rs) Income tax rate (%)
Up to 3,00,000 = 0 3,00,001-7,00,000 = 5% 7,00,001-10,00,000 = 10% 10,00,001-12,00,000 = 15% 12,00,001-15,00,000 = 20% 15,00,001 and above = 30%
Highest income tax rate of 30%
Five income tax slabs are available to taxpayers under the new tax system. If the net taxable income surpasses Rs 15 lakh, the highest income tax rate of 30% is applicable.
Rs 25,000 tax refund
Section 87A of the new tax system provides a Rs 25,000 tax refund. If the net taxable income is less than Rs 7 lakh, the tax refund is applicable.
Small taxpayers with marginal tax savings
The new tax system provides small taxpayers with marginal tax savings if their incomes are somewhat higher than Rs 7 lakh.
A lower surcharge of 25% on incomes above Rs 2 crore
The new tax regime introduced in FY 2020-21 offers lower rates without common deductions and exemptions. Over time, the government has increased the limits of deductions.
Salaried taxpayers to claim a standard deduction of Rs 75,000
The current income tax rules allow salaried taxpayers to claim a standard deduction of Rs 75,000 from gross salary income, while employers can contribute to the Tier-1 NPS account under Section 80CCD (2), allowing a maximum deduction of 14% of basic salary.
Additionally, the new tax system offers a 25% reduction in the surcharge on incomes above Rs 2 crore.
Which tax regime is the default option for taxpayers?
The new tax regime, effective from FY 2020-21, was initially optional and required taxpayers to opt in. However, it became the default option from April 1, 2023, requiring individuals to specifically opt for the old tax regime to claim tax exemptions and deductions
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