income tax
Published on 28 July 2025
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New Tax Regime: A Clear Guide for FY 2024–25 & FY 2025–26
India’s New Tax Regime has undergone major revisions—especially from Budget 2025. Whether you're salaried or self-employed, understanding the updated structure can help you make smarter tax decisions. Here’s everything you need to know, simplified.
Tax Slabs at a Glance
For FY 2024–25 (AY 2025–26)
| Annual Income | Tax Rate |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001–₹7,00,000 | 5% |
| ₹7,00,001–₹10,00,000 | 10% |
| ₹10,00,001–₹12,00,000 | 15% |
| ₹12,00,001–₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Section 87A Rebate: Income up to ₹7 lakh? You pay zero tax.
For FY 2025–26 (AY 2026–27) – Post Budget 2025
| 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% |
87A Rebate increased: No tax up to ₹12 lakh (₹12.75 lakh if salaried, thanks to standard deduction).
Key Deductions Still Available (New Regime)
Even though most common exemptions (like 80C, HRA, LTA) are gone, here’s what you can still claim:
- Standard deduction: ₹75,000 for salaried & pensioners
- Family pension deduction: ₹25,000
- Employer NPS contribution: Up to 14% (Govt. employees)
- Home loan interest: Only for let-out property
- Leave encashment: Tax-free up to ₹25 lakh (non-govt employees)
- Gratuity/VRS: As per existing rules
- Transport allowance: For specially abled persons
- Agniveer Corpus Fund (Sec 80CCH)
- Gifts: Up to ₹50,000 per year is tax-free
Section 87A Rebate – What You Save
| FY | Max Rebate | Max Income (after standard deduction) |
|---|---|---|
| 2024–25 | ₹25,000 | ₹7 lakh |
| 2025–26 | ₹60,000 | ₹12.75 lakh (salaried) |
Other Essentials
- Surcharge: Capped at 25% (old regime goes up to 37%)
- Cess: Health & Education Cess remains at 4%
Switching Regimes: Can You?
| Type of Taxpayer | Can You Switch Every Year? |
|---|---|
| Salaried Individual | Yes, every year |
| Business/Profession | Only once allowed back to old regime |
Common Questions
Q: Can I claim 80C or 80D deductions? No—those aren’t allowed under the new regime.
Q: Is insurance maturity tax-free? Yes, but only if total premium stays within ₹5 lakh per year or 10% of sum assured.
Q: Can I claim home loan interest? Only if the house is let out. No benefit for self-occupied homes.
Q: Are presumptive scheme limits higher? Yes! Now ₹3 crore for business and ₹75 lakh for professionals, under new regime by default.
Who Benefits Most from New Regime?
Choose the new tax regime if:
- You don’t claim many exemptions.
- You’re salaried with income up to ₹12.75 lakh — no tax at all.
- You prefer simplified filing and less paperwork.
- You're a high-income earner without HRA, housing loan, or large 80C investments.
Quick Comparison Table
| Feature | FY 2024–25 | FY 2025–26 |
|---|---|---|
| NIL tax limit | ₹3 lakh | ₹4 lakh |
| Std. deduction (salary/pension) | ₹75,000 | ₹75,000 |
| Family pension deduction | ₹25,000 | ₹25,000 |
| 87A rebate limit | ₹7 lakh (₹25k rebate) | ₹12 lakh (₹60k rebate) |
| Max tax-free income (salaried) | ₹7.75 lakh | ₹12.75 lakh |
| Regime switching (salaried) | Allowed | Allowed |
| Surcharge cap | 25% | 25% |
| Key deductions | Std. deduction, NPS, Agniveer, VRS, gifts | Same |
Final Word
The New Tax Regime now offers a broader tax-free slab, higher rebates, and far less paperwork. For many salaried taxpayers—especially those earning under ₹13 lakh—it’s becoming the more sensible choice.
That said, if you claim big deductions (like housing loans or Section 80C investments), the old regime may still work better for you.