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

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Income Tax Slabs Under Old and New Tax Regimes (FY 2025-26)

Taxpayers can choose between two tax regimes: the old tax regime and new tax regime. Each regime has distinct income tax slab rates and offers different benefits regarding deductions and exemptions.

Old Income Tax Slabs (FY 2025-26)

The old tax regime allows various deductions and exemptions, including under Section 80C, 80D, and House Rent Allowance (HRA). The tax slab rates under the old regime for individuals below 60 years are:

Annual Income	Tax Rate under Old Tax Regime
Up to ₹2,50,000	Nil
₹2,50,001 – ₹5,00,000	5%
₹5,00,001 – ₹10,00,000	20%
Above ₹10,00,000	30%

For senior citizens (60 years and above), the basic exemption limit is higher (₹3,00,000 for 60-80 years and ₹5,00,000 for above 80 years), but the slab rates remain the same beyond the exemption limit.

New Income Tax Slab Rates (FY 2025-26)

The new tax regime offers lower tax rates but does not allow most deductions or exemptions. The revised slabs effective from 1st April 2025 are:

Annual Income	Tax Rate under New Tax Regime
Up to ₹4,00,000	Nil
₹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	25%
Above ₹24,00,000	30%

Additionally, the basic exemption limit is extended to ₹4 Lakhs, and individuals with income up to ₹12 Lakhs are eligible for a rebate of ₹60,000 under Section 87A, making their tax liability zero. For salaried taxpayers, factoring in a standard deduction of ₹75,000, the exemption limit effectively extends to ₹12.75 Lakhs.

Comparison Between Old and New Tax Regimes (FY 2025-26)

Feature	Old Tax Regime	New Tax Regime
Basic Exemption Limit	₹2,50,000 (higher for seniors)	₹4,00,000
Deductions Allowed	Yes – Sections 80C, 80D, HRA, etc.	No deductions allowed
Tax Rates	Higher rates for higher income groups	Lower tax rates across slabs
Rebate Eligibility	Income up to ₹5,00,000	Income up to ₹12,00,000
Applicability	Beneficial for taxpayers with investments	Beneficial for those preferring simplicity

Which Income Tax Slab Regime Should You Choose?

Old Tax Regime: Suitable if you have significant investments and can claim deductions under Section 80C (up to ₹1.5 Lakhs), 80D, HRA, and others to reduce taxable income.
New Tax Regime: Suitable if you have minimal deductions or prefer a straightforward tax filing process with lower tax rates.

Impact of the 2025 Budget on Income Tax Slabs

The Union Budget 2025 introduced key changes to the new tax regime:

Increased basic exemption limit to ₹4 Lakhs.
Enhanced rebate under Section 87A to ₹60,000 for incomes up to ₹12 Lakhs.
For salaried individuals, standard deduction of ₹75,000 increases the effective exemption limit to ₹12.75 Lakhs.

These changes make the new tax regime more attractive compared to the old regime.

Income Tax Slabs for Different Taxpayer Categories

Salaried Individuals

Old Regime: Benefit from HRA, standard deduction, and investments in PPF or insurance.
New Regime: Lower tax rates with no deductions; simpler filing.

Freelancers / Self-employed

Old Regime: Can claim deductions like health insurance premiums.
New Regime: May prefer simplicity if deductions are minimal.

Business Owners

Old Regime: Preferable if claiming business expenses and other deductions.

New Regime: Suitable if fewer deductions and prefer lower tax rates.

Can I switch between old and new tax regimes?

Salaried individuals can switch regimes every financial year while filing returns. Business owners can switch only once and must file Form 10-IEA to opt out of the new regime.

What is the difference between Section 80C and Section 87A?

Section 80C allows deductions up to ₹1.5 Lakhs on investments under the old regime. Section 87A provides a rebate that reduces tax liability to zero if income is below ₹5 Lakhs (old regime) or ₹12 Lakhs (new regime).

What are the current salary income tax slabs?

Salary income is taxed as per the chosen regime’s slabs. The old regime allows deductions on salary components like HRA and standard deduction; the new regime applies lower slab rates without deductions.