income tax
Published on 28 July 2025
Understanding the New Tax Regime: Key Changes and Impacts for Taxpayers
New Tax Regime Guide (Updated for FY 2024–25 & FY 2025–26)
The Union Budget 2025 introduced important changes to India’s tax system, especially for those under the New Tax Regime—now the default choice. This guide breaks down the latest slab rates, rebates, deductions, and how to decide whether it works for you.
1. Income Tax Slabs: New Regime
FY 2024–25 (AY 2025–26)
| Income Range | 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% |
FY 2025–26 (AY 2026–27)
(As per Budget 2025 revisions)
| Income Range | 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% |
Rebate increased: Zero tax if income is up to ₹12 lakh, or ₹12.75 lakh for salaried individuals (thanks to standard deduction).
2. Standard & Pension Deductions
- Standard deduction: ₹75,000 (for salaried and pensioners)
- Family pension deduction: Lower of ₹25,000 or one-third of the pension received
These apply under the new regime starting FY 2024–25.
3. Tax Rebate (Section 87A) and “Zero Tax” Scenarios
| Financial Year | Max Income for Rebate | Max Rebate | Max Tax-Free Income (Salaried) |
|---|---|---|---|
| FY 2024–25 | ₹7 lakh | ₹25,000 | ₹7.75 lakh |
| FY 2025–26 | ₹12 lakh | ₹60,000 | ₹12.75 lakh |
If your total income stays within these limits, you won’t pay any income tax.
4. Deductions You Can Still Claim
While many popular deductions (like 80C, HRA, and LTA) aren’t allowed, the following are permitted under the New Tax Regime:
Allowed Deductions:
- ₹75,000 standard deduction
- ₹25,000 for family pension
- Employer’s NPS contribution: 14% (govt), 10% (others)
- Home loan interest (only if house is rented out)
- Agniveer Corpus (Sec 80CCH contributions)
- Leave encashment (up to ₹25 lakh)
- Gratuity, VRS benefits (per Sec 10 limits)
- Gifts received: Up to ₹50,000/year (Sec 56)
- Transport allowance: For specially-abled persons
5. Surcharge (FY 2025–26)
| Net Taxable Income | Surcharge Rate |
|---|---|
| Up to ₹50 lakh | Nil |
| ₹50 lakh – ₹1 crore | 10% |
| ₹1 crore – ₹2 crore | 15% |
| ₹2 crore – ₹5 crore | 25% |
| Above ₹5 crore | 25% (capped — was 37% earlier) |
6. Presumptive Taxation: New Limits
Effective FY 2025–26, higher limits apply for those under presumptive income schemes:
| Section | Old Limit | New Limit |
|---|---|---|
| 44AD (Businesses) | ₹2 crore | ₹3 crore |
| 44ADA (Professionals) | ₹50 lakh | ₹75 lakh |
7. Insurance & Provident Fund Rules
- PF interest: Tax-free on employee contributions up to ₹2.5 lakh/year
- Employer’s PF + NPS + Superannuation: Tax-free up to ₹7.5 lakh total per year
- Insurance maturity proceeds: Exempt only if annual premium < ₹5 lakh (for policies issued after Apr 2023)
8. Can You Switch Regimes?
- Salaried/Non-Business: Yes, you can opt-in or out every year.
- Business/Professionals: Only one lifetime switch back to the old regime is allowed (requires Form 10-IEA).
9. Is the New Regime Right for You?
Consider the New Tax Regime if:
- You don’t claim big deductions under 80C, 80D, HRA, etc.
- Your total income is under ₹12.75 lakh (salaried = zero tax)
- You want a simpler, no-documentation filing process
- You’re a high-income earner with no major housing or education loans
Stick with the Old Regime if:
- You benefit heavily from deductions like 80C, HRA, housing loan interest, or health insurance
- You have home loans for self-occupied property
- You’re doing long-term tax planning and prefer control
10. Quick FAQs
-
Are these slabs final? Yes, as per Budget 2025 updates and official notifications.
-
Can I claim medical insurance under 80D? No—not under the New Regime.
-
What’s the standard deduction now? ₹75,000 (from FY 2024–25 onward).
-
Is the Old Regime still available? Yes—but only if you choose to opt-in while filing your return.
Final Tip
Before filing your return, compare both tax regimes using online tax calculators. You may be surprised at which one saves you more—especially if you earn between ₹10–15 lakh annually.