The Indian government has introduced revised income tax slabs for the Financial Year 2025-26, bringing significant changes that impact individual taxpayers and businesses. The modifications are aimed at enhancing disposable income, promoting savings, and simplifying tax compliance. Here’s a detailed look at what’s changing and how it affects your salary and financial planning.
Key Highlights of the New Tax Slabs
The government has retained the two tax regimes—the old tax regime (which allows deductions and exemptions) and the new tax regime (which offers lower tax rates but without major deductions). However, in Budget 2025, some notable revisions have been made to make taxation more taxpayer-friendly.
Revised Tax Slabs for FY 2025-26
Under the new tax regime, the tax slabs are:
| Income Slab (₹) | Tax Rate (%) |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 – ₹6,00,000 | 5% |
| ₹6,00,001 – ₹9,00,000 | 10% |
| ₹9,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 25% |
Old Tax Regime (Unchanged)
The old tax regime remains the same, with tax slabs starting from ₹2,50,000 and offering deductions under Sections 80C, 80D, HRA, and other exemptions.
Major Changes and Their Impact
1. Increased Basic Exemption Limit
The basic exemption limit has been raised from ₹2,50,000 to ₹3,00,000, reducing the tax burden for low-income earners. Individuals earning up to ₹3 lakh annually won’t pay any income tax.
2. Higher Tax-Free Income with Rebate
The rebate under Section 87A has been extended to individuals earning up to ₹7,50,000 (up from ₹7,00,000 in the previous year). This means taxpayers under the new regime with incomes up to ₹7.5 lakh will pay zero tax.
3. Reduction in the Highest Tax Rate
The highest tax slab has been reduced from 30% to 25% for incomes above ₹15 lakh under the new regime. This benefits high-income earners by lowering their overall tax outgo.
4. Revised Standard Deduction
A standard deduction of ₹50,000 continues under both regimes, ensuring some relief for salaried individuals and pensioners.
5. Encouragement for New Tax Regime Adoption
With lower tax rates and a higher exemption limit, the government aims to push more taxpayers towards the new tax regime, reducing dependency on deductions and making compliance easier.
How This Affects Your Salary and Savings
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Higher Take-Home Salary: The reduced tax rates and increased rebate limit mean more disposable income.
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Limited Benefits for Old Regime Users: Taxpayers opting for the old regime can still claim deductions like PPF, ELSS, insurance premiums, and home loan interest.
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Better Financial Planning: The new structure encourages taxpayers to invest voluntarily rather than relying on tax-saving instruments for relief.
Conclusion
The new tax regime for FY 2025-26 offers simplified slabs, lower tax rates, and increased exemptions, making it more attractive for many taxpayers. However, individuals must analyze their income, expenses, and savings goals before choosing between the old and new tax regimes. With these changes, the government aims to boost savings, increase disposable income, and encourage tax compliance in India.