Income Tax Slab Changes in FY 2025-26: Complete Breakdown

The new regime slabs at a glance

Under the new tax regime for FY 2025-26, income up to ₹4 lakh is tax-free. The 5% slab applies to income from ₹4-8 lakh, 10% from ₹8-12 lakh, 15% from ₹12-16 lakh, 20% from ₹16-20 lakh, 25% from ₹20-24 lakh, and 30% beyond ₹24 lakh. A ₹75,000 standard deduction for salaried employees applies before these slabs, effectively making income up to ₹12.75 lakh tax-free for salaried individuals who qualify for the 87A rebate.

This is a significant widening compared to the previous year's slabs. The 5% bracket now extends to ₹8 lakh (up from ₹7 lakh), the 10% bracket extends to ₹12 lakh (up from ₹10 lakh), and entirely new slabs at 15% and 25% were introduced to smooth the progression.

The Section 87A rebate

If your taxable income (after deductions and standard deduction) is up to ₹12 lakh, the Section 87A rebate brings your total tax liability to zero under the new regime. For salaried employees, this means gross income up to ₹12.75 lakh (₹12 lakh + ₹75,000 standard deduction) results in zero tax.

The rebate is not available if you have business income (only salary income qualifies). For those with business income, the rebate threshold is lower, so check the specific rules.

Old regime slabs remain unchanged

The old regime slabs continue as before: up to ₹2.5 lakh exempt, 5% from ₹2.5-5 lakh, 20% from ₹5-10 lakh, and 30% above ₹10 lakh. However, the old regime still allows deductions under Sections 80C (₹1.5 lakh), 80D (health insurance), HRA, and home loan interest under Section 24(b).

For someone earning ₹15 lakh with ₹3 lakh in eligible deductions, the old regime might still result in lower tax — which is exactly why running both calculations matters before deciding.

Special rates that haven't changed

Capital gains tax rates remain the same: 12.5% for long-term equity gains above ₹1.25 lakh (held over 12 months), 20% for long-term debt gains with indexation, and 20% for listed equity sold within 12 months (short-term). The ₹1.25 lakh annual exemption on long-term equity gains provides a meaningful benefit for small investors.

Lottery and gambling income continue to be taxed at a flat 30%, plus applicable surcharge and cess, with no deductions allowed.

How to choose between regimes

If you have minimal deductions (no HRA, no home loan, minimal 80C investments), the new regime is almost certainly better. If you have substantial deductions exceeding ₹4-4.5 lakh, run both calculations using our Income Tax Calculator — the old regime can still win for high-deduction taxpayers, though the gap has narrowed significantly after Budget 2025.