FY 2025–26 Income Tax Slabs: Choosing Between New and Old Regime

As pre-Budget discussions continue for the Union Budget 2025–26, various industries are pushing for measures to support businesses, while taxpayers are keenly awaiting updates on income tax provisions.

Under the new tax regime for FY 2025–26, income up to Rs 12 lakh per year is exempt from tax. In other words, it means individuals with a “normal income” of Rs 12 lakh do not have to pay any income tax. It’s important to note that this exemption applies only to regular income and does not cover special-rate incomes such as Short-Term Capital Gains (STCG) or Long-Term Capital Gains (LTCG).

Default Tax Regime for FY 2025–26

The new tax regime will serve as the default for all ITR submissions in FY 2025–26. Individuals can opt for the old regime at the time of filing, but late ITRs filed after the deadline must follow the new tax regime.

New Tax Regime Slabs:

• ₹0–4,00,000 –  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: 25%
• Above ₹24,00,000: 30%

Benefits include:

• Standard deduction of ₹75,000 for salaried and pensioners
• Section 87A rebate for income up to ₹12 lakh
• NPS contribution deduction under Section 80CCD(2)

Old Tax Regime:

The old tax regime allows taxpayers to reduce their taxable income by claiming various exemptions and deductions. These include Section 80C (up to ₹1.5 lakh) for investments like PPF, ELSS, LIC; house rent allowance (HRA); leave travel allowance (LTA); home loan interest; health insurance premiums (80D); education loan interest (80E); and a standard deduction of ₹50,000 for salaried individuals.

Below 60 years:

Income (₹) Tax Rate

• 0-2,50,000 – 0%
• 2,50,001-5,00,000 – 5%
• 5,00,001-10,00,000 – 20%
• Above 10,00,000  – 30%

60 to below 80 years:

Income (Rs) Tax Rate

• 0-3,00,000  -0%
• 3,00,001-5,00,000 – 5%
• 5,00,001-10,00,000 – 20%
• Above 10,00,000 – 30 %

80 years and above

Income (Rs) Tax Rate 

• 0-5,00,000 – 0 %
• 5,00,001-10,00,000  -20%
• Above 10,00,000 – 30%

Which to Choose?

According to Aman Sharma, a chartered accountant based in Delhi, taxpayers earning up to Rs 12 lakh annually may find the new tax regime more advantageous, as most people fall within this income bracket.

On the other hand, he notes that the old regime could work better for those who have substantial deductions. This includes claims under sections 80C and 80D, HRA, or interest on home loans. It also applies if you have invested in tax-saving instruments like PPF, ELSS, or NSC, receive salary components such as HRA, LTA, or reimbursements that reduce taxable income, or are a senior citizen making use of multiple deductions.

Conclusion

It is important to assess your salary structure, deductions, and investments to pick the regime that minimizes your tax liability. For most middle-income earners, the new regime offers easier filing, while the old regime may benefit tax-savvy individuals with multiple exemptions.