Income Tax Slabs for FY 2025-26 (AY 2026-27): What Every Taxpayer Must Know 💰

Income Tax Slabs for FY 2025-26 (AY 2026-27): What Every Taxpayer Must Know 💰

Are you confused about the income tax slab for FY 2025-26 (AY 2026-27) and unsure which regime - new or old - will help you save more? This complete guide explains the Indian income tax latest slab rates in simple English so you can understand your taxable salary, payable tax percentage, and available rebates. You will learn how the new tax regime slabs compare with the old regime, what exemptions you get, how the slabs impact your ITR, and which regime is better for individuals earning different income levels. You will also find helpful tables, examples, updated rates, sections, changes, and practical tax planning tips. This blog post covers the entire topic in a friendly, beginner-focused way so you can easily file your income tax return without confusion. This is your complete guide to understanding income tax slab FY 2025-26 and choosing the best taxation regime for you.

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Introduction: Understanding Income Tax Slabs in India

Have you ever wondered why two people earning almost the same salary pay different levels of income tax? The main reason is the income tax slab you fall under, along with whether you choose the new or old tax regime. Every financial year, the Indian government updates income slab rates, exemptions, rebates, and rules under different sections. For FY 2025-26 (AY 2026-27), the latest slabs are very important for every individual, whether you are a salaried employee, freelancer, pensioner, self-employed professional, LLP partner, or director in a pvt ltd company.

In this guide, we will break down each concept in a simple, clean, and reader-first manner. You will learn the taxable income slabs, the difference between the new and old tax regime, the latest income tax percentage rates, and how to calculate your final payable tax. We will also compare both regimes with real examples so you can decide which one is better.

If you want to understand the Indian taxation system, this easy guide will help you file your ITR correctly and avoid mistakes. For additional clarity, you can also refer to safe external sources such as Wikipedia.

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What is an Income Tax Slab?

In India, income tax is calculated using a slab-based system. This means your tax payable percentage increases as your income increases. The government divides income into different slabs, and each slab has a different tax rate. These slabs apply differently under the new and old tax regime, and the slab structure changes from time to time as part of recent taxation updates.

Why does India follow the slab system?

• It ensures fair taxation
• Higher income earners pay higher taxes
• Lower earners get rebates and relief
• It encourages balanced income distribution
• It reduces the burden on low and middle-income individuals

The slab-based structure applies to every individual taxpayer including:

• Salaried employees
• Self-employed professionals
• Freelancers
• Pensioners
• HUF
• Individuals filing revised or updated returns

However, LLP, firms, AOP, BOI, and companies like Pvt Ltd, Ltd, Trusts, and Local Authorities do not follow slab-based taxation. They follow a fixed percentage rate under different sections.

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

For FY 2025-26, the income tax latest slab rates are divided into two main regimes:

• New Tax Regime (default)
• Old Tax Regime

You can choose either regime depending on which one gives you the lowest tax liability. The government encourages taxpayers to choose the new regime because it offers a simplified structure with lower tax rates and fewer exemptions.

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Income Tax Slabs Under New Tax Regime (FY 2025-26)

The new tax regime continues to offer lower tax rates but removes most exemptions and deductions. It is now the default taxation regime for all individuals unless you actively choose the old regime while filing ITR.

New Tax Regime Slab Rates FY 2025-26 (AY 2026-27)

Under this new regime, if your taxable income is up to ₹12,00,000, you can claim a rebate under Section 87A and pay zero tax. Also, a standard deduction of ₹75,000 is applicable to salaried individuals.

You can refer to the official Income Tax Department of India for verification of the latest updated slab structure.

Benefits of New Regime

• Lower tax rates
• Simpler slab structure
• Higher rebate up to ₹12 lakh
• No complex documentation

Limitations of New Regime

• Most exemptions removed
• No HRA, LTA, 80C, 80D, etc.
• Not suitable for high-saving individuals

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Income Tax Slabs Under Old Tax Regime (FY 2025-26)

The old tax regime continues to be available for people who claim multiple deductions and exemptions under the Income Tax Act. This regime is beneficial for individuals with higher savings and investments.

Old Tax Regime Slab Rates FY 2025-26

Deductions Under Old Regime

Under the old regime, you can claim deductions under:

• Section 80C - up to ₹1.5 lakh for PPF, ELSS, LIC, etc.
• Section 80D - for health insurance premiums.
• Section 24(b) - for home loan interest up to ₹2 lakh.
• Section 80CCD(1B) - NPS investment up to ₹50,000.

Benefits of Old Regime

• Claim full deductions
• Ideal for high investments
• HRA, LTA, 80C, 80D, 80G available

Limitations of Old Regime

• Higher tax rates
• More paperwork
• Not suitable for beginners or low-income earners

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Tax Rebate, Surcharge, and Cess for FY 2025-26

Every Indian taxpayer should also know about rebate, surcharge, and cess as they directly affect your tax payable.

• Rebate under Section 87A: If your income is up to ₹12 lakh (new regime) or ₹5 lakh (old regime), you can claim a full rebate on tax payable.
• Surcharge: Additional tax on income above ₹50 lakh. It starts at 10% and goes up to 37% depending on your income.
• Health and Education Cess: A flat 4% applied on total tax payable including surcharge.

So, when you calculate your income tax return (ITR), don't forget to include these extra charges while determining the final tax payable.

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Comparison Table: New Regime vs Old Regime (FY 2025-26)

Since the introduction of the new tax regime, taxpayers have had two choices each year - continue with the old regime (with exemptions and deductions) or shift to the new regime (with lower rates but fewer exemptions). This gives flexibility based on your income and investments. 🏦

Difference Between the Two Regimes

Choosing between the two depends on how much you invest in tax-saving instruments like PPF, ELSS, LIC, or home loan interest. You can also check our guide on How to File ITR Online for better understanding of filing returns.

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How to Calculate Taxable Income Under Both Regimes

To correctly compute your taxable income for FY 2025-26 (AY 2026-27), you must first know whether you are choosing the new or old tax regime. The calculation process is slightly different under each regime. The new regime uses simple slabs with almost zero exemptions, while the old regime allows many deductions under different sections such as 80C, 80D, 24(b), HRA, LTA, 80G, and more.

Steps to Calculate Taxable Income

Under New Tax Regime

1. Add all income sources (salary, interest, freelance income, rental income, capital gains where applicable)
2. Subtract eligible deductions (only a few are allowed under Sec 80CCD(2), standard deduction)
3. Arrive at taxable income
4. Apply new slab rates
5. Add 4% health & education cess
6. Check if you qualify for Section 87A rebate
7. Final tax payable = Tax after rebate + Cess

Under Old Tax Regime

1. Add total income from all sources
2. Subtract all exemptions (HRA, LTA, etc.)
3. Subtract deductions (80C, 80D, 80G, 80E, etc.)
4. Calculate taxable income
5. Apply old slab rates
6. Add 4% cess
7. Apply rebate if eligible

Why this matters: Most Indian taxpayers often pay extra tax simply because they forget to subtract deductions or choose the wrong regime. These steps ensure accuracy in your incometax calculation.

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Tax Calculation Examples for FY 2025-26 (AY 2026-27)

Let's take an example for better clarity 👇

Example 1: Under the New Regime

If your annual Income is ₹19,50,000:

• First ₹4,00,000 - No tax
• Next ₹4,00,000 - 5% = ₹20,000
• Next ₹4,00,000 - 10% = ₹40,000
• Next ₹4,00,000 - 15% = ₹60,000
• Next ₹3,50,000 - 20% = ₹70,000
• Total Tax = ₹1,90,000 + 4% cess : ₹7,600 = ₹1,97,600

Under the Old Regime

If your annual income is ₹19,50,000 and you claim ₹1.5 lakh under Section 80C and ₹25,000 under Section 80D:

• Taxable income = ₹19,50,000 - ₹1,75,000 = ₹17,75,000
• First ₹2,50,000 - No tax
• Next ₹2,50,000 - 5% = ₹12,500
• Next ₹5,00,000 - 20% = ₹1,00,000
• Next ₹7,75,000 - 30% = ₹2,32,500
• Total Tax = ₹3,45,000 + 4% cess : ₹13,800 = ₹3,58,800

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Example 2: Income ₹7,00,000 (Salaried Individual)

Under New Tax Regime

• Taxable Income = ₹7,00,000
• First ₹4,00,000 - No tax
• Tax (5%) on ₹3,00,000 = ₹15,000
• Cess 4% = ₹600
• Total Tax : ₹15,600 - Rebate u/s. 87a : ₹60,000 = Tax : ₹0
• Rebate u/s 87A = Full rebate of ₹15,600

Final Tax Payable = ₹0 under new regime.

Under Old Tax Regime

• First ₹2,50,000 - No tax
• Next ₹2,50,000 - 5% = ₹12,500
• Next ₹2,00,000 - 20% = ₹40,000
• Total Tax = ₹52,500 + 4% cess : ₹2,100 = Total Tax : ₹54,600
• Not Eligible as rebate is only up to ₹5 lakh income

New regime is clearly better for this income range.

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Example 3: Income ₹13,00,000 with investments

Under New Tax Regime

• First ₹4,00,000 - No tax
• Next ₹4,00,000 - 5% = ₹20,000
• Next ₹4,00,000 - 10% = ₹40,000
• Next ₹1,00,000 - 15% = ₹15,000
• Tax = ₹75,000 + 4% cess : ₹3,000 = Total Tax : ₹78,000
• No major exemptions allowed
• Total tax = ₹78,000

Under Old Tax Regime

Assume the following deductions:

• 80C = ₹1,50,000
• 80D = ₹25,000
• HRA = ₹1,00,000
• Standard deduction = ₹50,000
• Total Deductions = ₹3,25,000

• Total Income = ₹13,00,000 - Total Deductions = ₹3,25,000 = Taxable Income : ₹5,50,000
• First ₹2,50,000 - No tax
• Next ₹2,50,000 - 5% = ₹12,500
• Next ₹50,000 - 20% = ₹10,000
• Total Tax = ₹22,500 + 4% cess : ₹900 = Total Tax : ₹23,400
• Not Eligible as rebate is only up to ₹5 lakh income

• Nett Tax payable in the above case is : ₹23,400 (Tax : ₹22,500 + cess : ₹900)
• Old regime is better if you invest heavily.
• In this case, the old regime gives slightly more savings because of deductions. That's why comparing both is important before filing your ITR.

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Important Sections Affecting Taxable Income (Old Regime)

If you choose the old tax regime, these sections help reduce your taxable salary. Knowing them helps you maximise savings and reduce overall payable tax.

Section 80C (₹1,50,000 limit)

• PF, PPF
• ELSS mutual funds
• Life insurance premiums
• Tuition fees
• Home loan principal

Section 80D (Health Insurance)

• ₹25,000 for self + family
• ₹50,000 for senior citizen parents

Section 24(b) - Home Loan Interest

• Deduction up to ₹2,00,000
• Applies only under old regime

Section 80G - Donations

• 50% or 100% deduction depending on the organisation

Section 87A Rebate

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Taxation for Different Categories of Taxpayers

1. Senior Citizens (60-80 years)

• Old regime basic exemption = ₹5 lakh
• New regime exemption = ₹12 lakh
• Additional benefits under 80D

2. Super Senior Citizens (80+ years)

• Old regime basic exemption = ₹5 lakh
• No change in new regime

3. NRI Taxpayers

• Cannot use rebate under 87A
• No benefit of senior citizen slabs

4. LLP, Firm, Partnership Taxation

5. Pvt Ltd & Ltd Company Taxation

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Surcharge Rates for FY 2025-26

Note: Surcharge applies to both new and old tax regimes.

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Health & Education Cess

A 4% cess applies on the tax + surcharge. This cess is mandatory under both taxation regimes.

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Updated Income Tax Rules for FY 2025-26

Some important changes and updates impacting this year's income tax slab include:

• New regime is now default
• Higher rebate limit of ₹12 lakh
• Standard deduction available under new regime
• Company taxation unchanged
• Updated provisions for revised & updated return filing

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How to Choose Between New and Old Regime?

The biggest question for every individual taxpayer is: which regime should I choose? 🤔 The answer depends on your income, salary structure, and tax-saving investments.

New Regime is better if:

• Your investments are low
• You don't claim many deductions or exemptions.
• Your salary package doesn't include HRA, LTA, or 80C savings.
• Your taxable income is up to ₹12 lakh
• You prefer lower tax rates and a simple structure.

Old Regime is better if:

• You claim high deductions under Sections 80C, 80D, 24(b), etc.
• You have multiple tax-saving investments.
• You want to maximize your exemptions and reduce taxable income.
• You have HRA, LTA, home loan interest
• You invest regularly in tax-saving schemes
• Your employer gives many allowances

You can use an Income Tax Calculator to compare both regimes before filing your ITR.

Tip: Prepare both calculations once and select the regime with the lower tax payable. Most salaried employees find the new regime beneficial if they don't heavily invest.

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Common Allowances & Their Taxability

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Tax Planning Tips for FY 2025-26

• Use 80C fully if choosing old regime
• Buy health insurance for extra tax savings
• Review your Form 16 properly
• Choose the regime wisely before filing ITR
• Maintain proof for all deductions
• Avoid last-minute tax planning
• Use official portals like Income Tax e-filing website

Why this matters: Most taxpayers lose between ₹10,000-₹35,000 every year due to improper tax choices. Following basic tax planning helps reduce your payable tax significantly.

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Detailed Comparison: New vs Old Tax Regime (FY 2025-26)

Before filing your ITR, it's important to compare both regimes side-by-side. This simple table helps you choose based on your income, taxable salary, slab rates, exemptions, and total payable tax under FY 2025-26 (AY 2026-27).

If you claim many deductions, the old regime wins. If not, the new regime is usually better.

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Real-Life Examples: Which Regime Saves More?

Case 1: Taxpayer With No Investments

• Salary income = ₹9 lakh
• No deductions claimed
• No HRA / LTA

Winner: New Regime (lower payable percentage).

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Case 2: Taxpayer With Maximum 80C + Home Loan

• Salary = ₹12 lakh
• 80C = full ₹1,50,000
• 80D = ₹30,000
• 24(b) = ₹2,00,000 interest

Winner: Old Regime - higher exemptions = lower taxable income.

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Case 3: Senior Citizen With Moderate Investments

• Income: ₹7 lakh
• Health insurance + 80C savings

Winner: Depends - both regimes may give near-zero tax after rebate.

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Common Mistakes Taxpayers Should Avoid

• Choosing a regime without comparing tax
• Missing Form 16 details
• Not claiming eligible deductions
• Filing ITR under the wrong section
• Forgetting about income from interest or freelance work
• Missing deadline for revised/updated return

Tip: Always compute tax under both systems before finalizing.

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Most Important Exemptions and Deductions under Income Tax You Must Know

Even though the new regime has limited deductions, understanding key sections of the Income Tax Act helps you plan your taxable income better:

• Section 80C: Investment in PPF, ELSS, NSC, LIC, etc. (up to ₹1.5 lakh)
• Section 80D: Medical insurance premium (₹25,000-₹1,00,000)
• Section 80E: Interest on education loan (no upper limit)
• Section 24(b): Interest on home loan (up to ₹2 lakh)
• Section 80G: Donations to approved trusts or NGOs
• Section 80TTA: Interest on savings account (up to ₹10,000)
• Section 115BAC - New regime slabs
• Section 139(5) - Revised return
• Section 139(8A) - Updated return
• Section 87A - Rebate (up to ₹12 lakh)

If you're confused, always check the Wikipedia page on Indian Income Tax for reliable background details.

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Salary Breakdown: Components That Affect Tax

Your tax slab depends not only on salary amount but also on the structure. Some allowances are taxable, while others help reduce taxable income.

A smart salary structure can reduce your tax by lakhs over the years.

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Checklist: Before Filing ITR for FY 2025-26

1. Reconcile salary with Form 16
2. Verify TDS in Form 26AS / AIS / TIS
3. Select the correct tax regime
4. Declare all income sources
5. Upload valid proofs for deductions (if applicable)
6. Pay self-assessment tax if required
7. Submit the ITR & e-verify within due dates

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Best Tools for Income Tax Calculation

• Income Tax Department Calculator (Official)
• GSTN & NSDL Utilities
• CA/Accounting Software
• Trusted online tax calculators

Note: Always cross-check manually once for accuracy.

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Recent Updates & Announcements for FY 2025-26

In the Union Budget 2025, the government continued to promote the new regime by increasing the standard deduction to ₹75,000. This step benefits regular salaried employees and middle-class families across India. 🏡

Other recent updates include revised surcharge rates for high-income earners and more clarity on rebate under Section 87A. For authentic updates, visit the official Income Tax e-filing portal.

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Conclusion

The income tax slab FY 2025-26 (AY 2026-27) offers taxpayers the freedom to choose between the new and old tax regime. The new regime is simple, transparent, and suitable for individuals who do not claim many exemptions, while the old regime continues to benefit those with investments and eligible deductions. By understanding slab rates, taxable income rules, deductions, exemptions, and applicable sections, every individual can reduce their total tax payable easily. Always compare both systems before filing ITR to maximise savings and avoid mistakes. Smart planning ensures lower tax, better financial stability, and higher long-term returns.

Remember - tax planning is not about avoiding tax, it's about paying it smartly. 💡 Stay updated, use an income tax calculator, and keep an eye on future revised slabs to plan your finances better each year.

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Quick Summary of Key Takeaways

• New regime = default + rebate up to ₹12 lakh
• Old regime = beneficial for high deductions
• Use 80C, 80D, 24(b) to reduce tax under old system
• 4% cess applies in both regimes
• Senior citizens get higher limits (old regime)
• Compare both regimes before filing ITR
• Plan early to save maximum tax

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Frequently Asked Questions (FAQs)

What is the income tax slab for FY 2025-26?

The income tax slab FY 2025-26 (AY 2026-27) includes the default new regime slabs starting at zero up to ₹4 lakh, followed by progressive rates. The old regime slabs are optional and include different exemptions.

What are the income tax slabs for FY 2025-26 under the new regime?

The latest updated slab for FY 2025-26 starts with 0% up to ₹4 lakh, 5% for ₹4-8 lakh, 10% for ₹8-12 lakh, 15% for ₹12-16 lakh, 20% for ₹16-20 lakh, 25% for ₹20-24 lakh, and 30% above ₹24 lakh.

Which is better: new or old tax regime?

New regime is better for taxpayers with fewer deductions; old regime is better for those who claim HRA, 80C, 80D, and home loan benefits. Compare both before filing.

What is the rebate limit under Section 87A?

Under the new regime, rebate applies up to ₹12 lakh income. Under the old regime, rebate applies up to ₹5 lakh income.

How to file income tax return online?

You can visit the official Income Tax e-filing portal or check our ITR filing guide for step-by-step help.

Are LLPs and Pvt. Ltd. companies taxed under the same slabs?

No. LLPs and companies have separate taxation rates (30% for LLPs and 22% or 25% for companies) under different sections of the Income Tax Act.

Can I change my tax regime every year?

Salaried individuals can change their regime every financial year. Business income taxpayers can change only once; after that, restrictions apply.

Are deductions allowed in the new tax regime?

Most deductions (80C, 80D, HRA, LTA) are not allowed. Only standard deduction and some employer contributions are permitted.

What is the difference between FY and AY in income tax?

FY (Financial Year) is the year you earn income, and AY (Assessment Year) is when you file your ITR and pay tax on that income.

How do surcharge and cess apply?

A surcharge is added when income exceeds certain limits (₹50 lakh, ₹1 crore, etc.). A mandatory 4% cess applies on tax + surcharge.

Do senior citizens get special benefits?

Yes, under the old regime senior and super senior citizens get higher basic exemption limits. But under the new regime all individuals follow the same slab.

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