Income Tax Slabs for FY 2025-26 (AY 2026-27)

The Budget 2025 proposed new tax slab rates under section 115BAC i.e., the New Tax Regime or the Default Tax Regime. This was to ensure that individuals save more and increase their spending capacity. These revised tax slab rates will be applicable for income earned in FY 2025-26 onwards.

Key Features of the New Regime:

1. Increased Rebate (Section 87A):

• Rebate raised to ₹60,000(from ₹25,000), making incomes up to ₹12 lakh tax-free .
• For salaried individuals, the effective tax-free limit is ₹12.75 lakh(including ₹75,000 standard deduction) .

2. Higher Basic Exemption:

• Increased from ₹3 lakh to ₹4 lakh.

3. No Major Deductions:

• Only standard deduction (₹75,000)and employer’s NPS contribution (14% of basic salary) are allowed .

4. Surcharge:

• Capped at 25%for incomes above ₹2 crore (vs. 37% in the old regime) .

Old Tax Regime Slabs (FY 2025-26)

No changes were made to the old regime slabs, which remain age-dependent :

For Individuals Below 60 Years:

For Senior Citizens (60–80 Years):

• ₹3 lakhbasic exemption (0% tax).
• 5%for ₹3–5 lakh, 20% for ₹5–10 lakh, 30% above ₹10 lakh .

For Super Seniors (80+ Years):

• ₹5 lakhbasic exemption (0% tax).
• 20%for ₹5–10 lakh, 30% above ₹10 lakh .

Key Changes in FY 2025-26

1. Rebate Expansion:

• Tax-free income limit raised to ₹12 lakh (new regime) .

2. TDS Thresholds Increased:

• Senior citizens’ interest income TDS threshold raised to ₹1 lakh(from ₹50,000) .
• Rent TDS threshold increased to ₹50,000/month(from ₹2.4 lakh/year) .

3. TCS Relaxations:

• No TCS on education loans under LRS (Liberalized Remittance Scheme) .
• Threshold for overseas remittance TCS raised to ₹10 lakh(from ₹7 lakh) .

Which Regime to Choose?

• New Regime: Better for those with limited investments/deductions(e.g., salaried employees with incomes under ₹12 lakh) .
• Old Regime: Beneficial for those claiming deductions (e.g., 80C, 80D, HRA)or with incomes above ₹15 lakh