Income Tax Slabs FY 2025-26: New vs Old Regime Explained | Myfinflow
Explore the latest income tax slabs for FY 2025-26 (AY 2026-27) under the new and old regimes. Understand tax rates, exemptions, and choose the best option for your financial planning.
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Income Tax Slabs FY 2025-26 (AY 2026-27): Comprehensive Guide to New and Old Regimes
The Union Budget 2025 introduced significant changes to the income tax structure in India. Understanding these revisions is crucial for effective tax planning. This guide delves into the updated tax slabs under both the new and old regimes, helping you make informed financial decisions.
New Tax Regime for FY 2025-26: Simplified Slabs and Increased Exemptions
The new tax regime aims to simplify taxation by offering lower tax rates with limited exemptions. Key features include:
Revised Income Tax Slabs:
| Annual 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% |
Enhanced Basic Exemption Limit: Increased from ₹3 lakh to ₹4 lakh.
Section 87A Rebate: Taxpayers with income up to ₹12 lakh are eligible for a rebate of ₹60,000, effectively reducing their tax liability to zero.
Standard Deduction: Salaried individuals and pensioners can claim a standard deduction of ₹75,000.
Note: The new regime is the default option; taxpayers must opt for the old regime if preferred
Old Tax Regime for FY 2025-26: Traditional Structure with Deductions
The old tax regime continues to offer various deductions and exemptions, making it suitable for those with significant investments and expenses eligible for tax benefits.
Income Tax Slabs:
| Annual 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% |
Deductions Available:
Section 80C: Investments in PPF, NSC, ELSS, etc., up to ₹1.5 lakh.
Section 80D: Health insurance premiums.
Section 24(b): Home loan interest.
House Rent Allowance (HRA): For salaried individuals living in rented accommodations.
Age-Based Exemption Limits:
Senior Citizens (60-79 years): ₹3 lakh.
Super Senior Citizens (80 years and above): ₹5 lakh.
New vs. Old Tax Regime: Which Should You Choose?
Choosing between the new and old tax regimes depends on individual financial situations:
New Regime:
Lower tax rates.
Fewer deductions and exemptions.
Simplified compliance.
Old Regime:
Higher tax rates.
Availability of various deductions and exemptions.
Beneficial for those with significant tax-saving investments.
Tip: Calculate tax liability under both regimes to determine the most beneficial option.
Conclusion
Understanding the nuances of both tax regimes is essential for optimal tax planning. Evaluate your income, investments, and eligible deductions to choose the regime that offers maximum benefits. Stay informed and consult with a tax advisor to make the best decision for your financial health.
