India Income Tax for FY 2025-26: Complete Guide
India's income tax system offers salaried individuals a choice between two regimes: the New Tax Regime (default, lower rates, fewer deductions) and the Old Tax Regime (higher rates but allows deductions under Chapter VI-A including 80C, 80D, and HRA exemptions). The key change in Budget 2025: the New Regime now provides a full rebate u/s 87A for taxable income up to ₹12 lakh, making it effectively zero tax for incomes up to approximately ₹12.75 lakh (after the ₹75,000 standard deduction).
New Tax Regime: Slabs for FY 2025-26
| Taxable Income | Tax Rate |
|---|---|
| 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% |
Note: Full rebate u/s 87A for taxable income ≤ ₹12,00,000 (effectively zero tax). Standard deduction of ₹75,000 applies. Health & Education Cess of 4% applies on tax payable.
Old Tax Regime: Slabs for FY 2025-26 (Below 60 Years)
| Taxable Income | Tax Rate |
|---|---|
| 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% |
Rebate u/s 87A: ₹12,500 for taxable income up to ₹5,00,000 (zero tax for income up to ₹5L). Standard deduction ₹50,000. Health & Education Cess 4%.
New vs. Old Regime: Which is Better for You?
| Annual Salary | Tax (New Regime) | Tax (Old Regime, with max 80C+80D) | Better Option |
|---|---|---|---|
| ₹7,00,000 | ₹0 (rebate) | ₹0 (rebate) | New (simpler) |
| ₹10,00,000 | ₹0 (rebate) | ~₹54,600 | New Regime |
| ₹12,00,000 | ₹0 (rebate) | ~₹83,200 | New Regime |
| ₹15,00,000 | ~₹1,17,000 | ~₹1,40,400 (without ded) / ~₹83,200 (with max ded) | Depends on deductions |
| ₹20,00,000 | ~₹2,34,000 | ~₹3,27,600 (without ded) / ~₹2,31,400 (with max ded) | New Regime (usually) |
Key Deductions Under Old Tax Regime
- Section 80C (₹1.5 lakh max): PPF, EPF, ELSS, LIC, NSC, home loan principal, children's tuition.
- Section 80D (₹25,000–₹50,000): Health insurance premiums for self, spouse, and children (₹50,000 for senior citizens).
- HRA Exemption: Calculated as minimum of (actual HRA received, rent paid − 10% of basic salary, or 50%/40% of basic salary for metro/non-metro cities).
- NPS Contribution (80CCD): Additional ₹50,000 deduction over and above 80C limit.
- Standard Deduction: ₹50,000 flat deduction from salary — no receipts required.