income tax
Published on 21 July 2025
New Income Tax Slabs and Changes for FY 2025-26 Explained
Budget 2025: What the New Income Tax Slabs Really Mean for You
The government’s 2025 Union Budget has quietly but significantly reshaped how much salaried taxpayers will owe the taxman starting this financial year. While the headlines talk about “simplification” and “relief,” what’s really changed—and who actually benefits?
If you're earning anywhere between ₹6 lakh and ₹24 lakh a year, this new structure might just leave you with more money in hand, fewer deductions to chase, and a tax filing process that's far less complicated.
The Revised Income Tax Slabs (New Regime, FY 2025-26)
Here’s how the new structure now looks:
| Total 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% |
The big shift? A higher base exemption and softer transitions between slabs—something middle-class taxpayers have long asked for.
Section 87A: Rebate Expanded to ₹60,000
In a move aimed squarely at easing pressure on salaried middle-income households, the government has enhanced the Section 87A rebate:
- Rebate amount: ₹60,000 (earlier ₹25,000)
- Applies if your income is up to ₹12 lakh
- Translation: If your income (post-standard deduction) is ₹12.75 lakh or less, you pay zero tax under the new regime.
Key Deductions: What's In and What's Out?
Let’s be clear—the new regime doesn't offer the buffet of deductions the old one does. But here’s what you can still claim:
- ₹75,000 standard deduction (for salaried/pensioners)
- Employer’s NPS contributions (up to 14% of basic)
- No HRA, 80C (LIC/PPF), 80D (Health Insurance), or home loan interest deductions
So if you’re someone who doesn’t invest heavily for tax purposes or rent a house in a metro city, this regime probably works in your favour.
A Word on the Old Regime: Still an Option
Yes, you can still opt for the old structure—but only if you actively choose to do so while filing your return.
| Aspect | Old Regime | New Regime |
|---|---|---|
| Basic Exemption | ₹2.5L–₹5L | ₹4L |
| Rebate Limit | ₹5L (₹12,500) | ₹12L (₹60,000) |
| Deductions | Full (80C, HRA, etc.) | Limited (Std. Deduction + NPS) |
| Best For | Those with high deductions | Salaried without many claims |
Bonus: New NPS Deduction for Parents
If you’re a parent contributing to your child’s NPS Vatsalya account, the old regime now lets you claim this under Section 80CCD(1B). This is over and above the standard ₹1.5 lakh limit under 80C.
This could be useful for families planning long-term investments in a child's retirement future—or looking to reduce taxable income without taking on insurance policies they don’t need.
Real Impact for Real People
Let’s say you earn ₹13.5 lakh a year:
-
Under the new regime:
- You get ₹75,000 standard deduction → taxable income becomes ₹12.75 lakh
- You qualify for the ₹60,000 rebate under Section 87A
- Net tax = ZERO
Compare that to the old regime, where you’d have to juggle LIC receipts, rent agreements, ELSS investments and medical bills to bring your income down enough for similar savings.
Final Thoughts
The 2025 tax update doesn’t just move numbers around—it simplifies the whole approach to income tax for lakhs of Indians. If you're salaried and not claiming home loans or a basket of deductions, the new regime likely gives you a better deal.
But as always, numbers alone don’t decide what’s best. Do the math based on your actual deductions, investments, and lifestyle. The new slabs are generous—but only if they align with how you already manage your money