Income Tax Slab India: Comprehensive Guide for FY 2025-26 (AY 2026-27)

Understanding the Income Tax Slab is essential for effective tax planning and compliance. The Government of India has introduced notable changes to the Income Tax Slabs for FY 2025-26 (AY 2026-27) to simplify the system and increase taxpayer benefits. This guide provides an in-depth look at the revised tax slabs, compares the old and new regimes, and offers guidance to help you choose the most suitable tax structure.

Understanding Income Tax Slabs

India follows a progressive tax structure where tax rates increase with higher income levels. Taxpayers can choose between:

Old Tax Regime: Offers multiple exemptions and deductions.
New Tax Regime (Section 115BAC): Features lower tax rates but limited exemptions.

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

The revised slab rates under the new regime are as follows:

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%

These new slabs are designed to reduce the tax burden for middle-income earners and boost disposable income, encouraging economic growth.

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

Slabs under the old tax regime remain unchanged:

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%

The old regime allows various deductions and exemptions, including those under Sections 80C, 80D, and HRA.

Major Changes and Advantages in the New Tax Regime

Increased Basic Exemption Limit: Raised from ₹3 lakh to ₹4 lakh, offering relief to lower-income groups.
Revised Tax Slabs: Additional slabs with lower rates reduce the overall tax liability.
Default Regime: The new regime is the default, though taxpayers can opt for the old regime when filing returns.

Comparative Analysis: Old vs. New Tax Regime

Criteria	Old Tax Regime	New Tax Regime
Basic Exemption Limit	₹2,50,000	₹4,00,000
Tax Rates	Higher rates, fewer slabs	Lower rates, more slabs
Deductions & Exemptions	Available (e.g., 80C, 80D, HRA)	Mostly not available
Simplicity	More complex due to multiple exemptions	Simplified with fewer exemptions
Best Suited For	Individuals with significant deductions	Individuals with fewer or no deductions

Deductions Available Under Each Regime

Deduction Type	Old Regime	New Regime
Standard Deduction (Salaried/Pensioners)	₹75,000	₹75,000
Section 80C (LIC, PPF, ELSS)	Up to ₹1.5 lakh	Not allowed
Section 80D (Health Insurance)	Allowed	Not allowed
Section 80CCD(1B) (NPS)	Allowed	Up to ₹50,000
HRA, LTA, Interest on Home Loan	Allowed	Not allowed

Selecting Between the Old and New Tax Regimes

Choose the New Regime if: You have minimal investments in tax-saving instruments and prefer a lower tax rate with fewer complexities.

Choose the Old Regime if: You invest heavily in tax-saving options and can significantly reduce taxable income through deductions and exemptions.

It’s advisable to calculate tax liabilities under both regimes or consult a tax expert to determine the most beneficial option.

Conclusion

The revised Income Tax Slabs for FY 2025-26 mark a move towards a simpler and more equitable system. A thorough understanding of the changes and a comparison based on your financial situation will empower you to make smarter tax decisions and improve financial planning.

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