Income Tax Slab Rates for FY 2025-26 (AY 2026-27)
For the financial year 2025-26 (assessment year 2026-27), the new tax regime is the default, and it is the year the government made it genuinely attractive for the middle class. The basic exemption limit rose to ₹4,00,000, and a taxable income up to ₹12,00,000 now attracts zero tax after the enhanced Section 87A rebate. A salaried person can earn up to ₹12,75,000 and still pay nothing, once the ₹75,000 standard deduction is applied. The old regime survives unchanged for those whose deductions are large enough to beat the new slabs.
This page gives you both regimes side by side, the surcharge and cess layers on top, three worked examples, and clear break-even guidance so you can pick correctly rather than by habit.
New Regime Slabs FY 2025-26 (Default)
The new regime under Section 115BAC is the default for FY 2025-26. If you do nothing, this is the regime your return is computed under. The slabs were widened in the Finance Act 2025 and now run in clean ₹4 lakh bands.
Tax Rate Chart
New Tax Regime Slabs, FY 2025-26 (AY 2026-27)
Default regime under Section 115BAC. Applies to all individuals and HUFs unless the old regime is opted for.
Up to ₹4,00,000
Basic exemption, raised from ₹3,00,000
₹4,00,001 to ₹8,00,000
First taxable band
₹8,00,001 to ₹12,00,000
Rebate still wipes tax out up to ₹12L
₹12,00,001 to ₹16,00,000
Rebate no longer available above ₹12L
₹16,00,001 to ₹20,00,000
₹20,00,001 to ₹24,00,000
Above ₹24,00,000
Top marginal rate
Source: Finance Act 2025, Section 115BAC(1A)
Two structural facts define the new regime this year:
- Basic exemption is ₹4,00,000, up from ₹3,00,000, with effect from 1 April 2025. That first ₹4 lakh is tax-free for every taxpayer regardless of age; the new regime does not give extra exemption to senior or super-senior citizens.
- The Section 87A rebate now covers taxable income up to ₹12,00,000, with a maximum rebate of ₹60,000. This is why tax is effectively nil up to ₹12 lakh even though the slab math produces a positive figure. Read the mechanics in our Section 87A rebate guide.
Why the ₹12 Lakh Figure Matters
The slabs alone would tax a ₹12 lakh income at ₹60,000. The rebate then cancels exactly that amount, so your net liability is zero. Cross ₹12,00,001 and the rebate disappears entirely, which is why the effective jump at that threshold feels sharp. Marginal relief provisions soften the immediate cliff for incomes just over ₹12 lakh, but the planning point is simple: keeping taxable income at or below ₹12,00,000 is worth real money.
The 87A rebate does not apply to income taxed at special rates. Long-term capital gains taxed at 12.5% and short-term gains at 20% under Section 111A are outside the rebate. So a person with ₹11 lakh salary and ₹2 lakh of listed-equity LTCG still pays tax on the gains, even though total income looks like it should be covered. See capital gains tax rules for AY 2026-27.
Standard Deduction Lifts the Salaried Ceiling
Salaried taxpayers and pensioners get a ₹75,000 standard deduction under the new regime. That pushes the effective tax-free ceiling to ₹12,75,000 of gross salary, because the deduction brings taxable income back down to ₹12,00,000 where the rebate still applies. We cover this in detail in the ₹75,000 standard deduction guide.
Old Regime Slabs FY 2025-26 (Unchanged)
The old regime was left untouched this year. Its exemption limits and slab rates are the same as prior years, and it remains available to anyone who explicitly opts for it. Its appeal is that it keeps the full menu of deductions, which the new regime strips away.
| Income slab (FY 2025-26) | Below 60 years | Senior (60 to 80) | Super senior (80+) |
|---|---|---|---|
| Basic exemption | Up to ₹2,50,000 | Up to ₹3,00,000 | Up to ₹5,00,000 |
| ₹2,50,001 to ₹5,00,000 | 5% | 5% (from ₹3L) | Nil up to ₹5L |
| ₹5,00,001 to ₹10,00,000 | 20% | 20% | 20% |
| Above ₹10,00,000 | 30% | 30% | 30% |
Key old-regime facts for FY 2025-26:
- Section 87A rebate applies to taxable income up to ₹5,00,000, with a maximum rebate of ₹12,500. Above ₹5 lakh, tax is payable on the full slab basis.
- Standard deduction for the salaried and pensioners is ₹50,000, lower than the new regime's ₹75,000.
- Deductions are the whole point: the old regime lets you claim Section 80C up to ₹1,50,000, Section 80D health insurance, HRA under Section 10(13A), home loan interest under Section 24, and the rest of Chapter VI-A.
New vs Old Regime: Side by Side
The two systems differ on three axes: exemption limit, slab width, and what you can deduct. The new regime wins on headline rates; the old regime wins only if your deductions are large.
| Feature | New regime (default) | Old regime (opt-in) |
|---|---|---|
| Basic exemption | ₹4,00,000 (all ages) | ₹2,50,000 / ₹3,00,000 / ₹5,00,000 by age |
| 87A rebate covers up to | ₹12,00,000 taxable income (max ₹60,000) | ₹5,00,000 taxable income (max ₹12,500) |
| Standard deduction (salaried) | ₹75,000 | ₹50,000 |
| Section 80C, 80D, HRA, home loan | Not available | Available |
| 80CCD(2) employer NPS | Available | Available |
| 80JJAA (new employment) | Available | Available |
| Top slab rate | 30% above ₹24,00,000 | 30% above ₹10,00,000 |
| Maximum surcharge | Capped at 25% | Up to 37% |
| Best for | Most taxpayers, especially those without large deductions | Taxpayers with high 80C, 80D, HRA and home loan claims |
The new regime disallows most Chapter VI-A deductions. The two that survive are 80CCD(2) (employer contribution to NPS) and 80JJAA (deduction for additional employee cost). For a full walk-through of the trade-off, see old vs new tax regime, which is better for AY 2026-27.
Surcharge and Cess: The Layers on Top
Slab tax is not the final number. On higher incomes, a surcharge is added, and a health and education cess sits on top of tax plus surcharge in both regimes.
| Total income | Surcharge rate |
|---|---|
| Above ₹50,00,000 up to ₹1 crore | 10% |
| Above ₹1 crore up to ₹2 crore | 15% |
| Above ₹2 crore | 25% |
The new regime caps the top surcharge at 25%. The 37% surcharge slab that exists in the old regime for incomes above ₹5 crore has been removed under the new regime. This makes the new regime materially cheaper for very high earners, whose effective top rate falls accordingly.
On top of tax plus surcharge, a Health and Education Cess of 4% applies in both regimes. So the true marginal cost of an extra rupee at the top is the slab rate, grossed up by any applicable surcharge, and then by 4% cess.
Worked Examples
The numbers below use gross salary, apply the standard deduction, then compute tax under the new regime (the default). Cess is added at 4%. Surcharge does not apply at these income levels.
Example 1: Salaried, ₹10,00,000 Gross
- Standard deduction: ₹75,000, so taxable income = ₹9,25,000.
- Slab tax: ₹4L to ₹8L at 5% = ₹20,000; ₹8L to ₹9.25L at 10% = ₹12,500. Total = ₹32,500.
- Since taxable income is below ₹12,00,000, the 87A rebate wipes out the entire ₹32,500.
- Tax payable: Nil.
A ₹10 lakh salaried earner pays zero tax under the new regime for FY 2025-26. Under the old regime, the same person would need roughly ₹2.5 lakh of deductions to reach a comparable outcome.
Example 2: Salaried, ₹15,00,000 Gross
- Standard deduction: ₹75,000, so taxable income = ₹14,25,000.
- Slab tax: ₹4L to ₹8L at 5% = ₹20,000; ₹8L to ₹12L at 10% = ₹40,000; ₹12L to ₹14.25L at 15% = ₹33,750. Total = ₹93,750.
- Taxable income exceeds ₹12,00,000, so no 87A rebate.
- Add 4% cess: ₹93,750 + ₹3,750 = ₹97,500.
This is the income band where the regime choice is closest. If this person has ₹1.5 lakh of 80C, ₹25,000 of 80D, and significant HRA or home loan interest, the old regime can pull ahead. Without those, the new regime is clearly cheaper.
Example 3: ₹25,00,000 Gross Salary
- Standard deduction: ₹75,000, so taxable income = ₹24,25,000.
- Slab tax: ₹4L to ₹8L at 5% = ₹20,000; ₹8L to ₹12L at 10% = ₹40,000; ₹12L to ₹16L at 15% = ₹60,000; ₹16L to ₹20L at 20% = ₹80,000; ₹20L to ₹24L at 25% = ₹1,00,000; ₹24L to ₹24.25L at 30% = ₹7,500. Total = ₹3,07,500.
- No 87A rebate. Surcharge does not apply below ₹50 lakh.
- Add 4% cess: ₹3,07,500 + ₹12,300 = ₹3,19,800.
At this income, the new regime almost always wins because matching it in the old regime would require deductions well beyond what most salaried taxpayers can genuinely claim.
Which Regime Should You Pick?
The decision reduces to one comparison: is your total deduction claim under the old regime large enough to make its higher slab rates cheaper than the new regime's lower ones?
Step-by-Step Guide
Regime Selection in Four Steps
Add up your real deductions
80C, 80D, HRA, home loan interest, NPS 80CCD(1B). Use actuals you can prove, not aspirational figures.
Old regime onlyCompute new-regime tax
Apply ₹75,000 standard deduction, then the new slabs. If taxable income is at or below ₹12L, tax is nil.
DefaultCompute old-regime tax
Subtract your deductions, apply old slabs and ₹50,000 standard deduction, check the ₹5L rebate ceiling.
Opt-inFile under the lower one
Salaried taxpayers can switch each year. Business income has restrictions on switching back.
DecideSource: Section 115BAC, Income Tax Act 1961
Break-even guidance. As a rule of thumb for FY 2025-26, if your combined old-regime deductions (80C, 80D, HRA, home loan interest and NPS) are modest, the new regime wins comfortably at almost every income level. The old regime tends to win only when total deductions run into several lakhs, typically for taxpayers claiming full ₹1.5 lakh 80C, substantial HRA in a metro, and home loan interest near the ₹2 lakh cap together. Below that, the new regime's wider slabs and larger standard deduction and rebate carry the day.
Salaried taxpayers may choose the regime afresh each assessment year. Taxpayers with business or professional income who opt out of the new regime face restrictions on switching back, so that choice deserves more care.
Frequently Asked Questions
What is the basic exemption limit for FY 2025-26?
Under the new regime it is ₹4,00,000 for all individuals regardless of age. Under the old regime it is ₹2,50,000 for those below 60, ₹3,00,000 for senior citizens aged 60 to 80, and ₹5,00,000 for super senior citizens aged 80 and above.
Is income up to ₹12 lakh really tax-free under the new regime?
Yes, for taxable income up to ₹12,00,000 the Section 87A rebate of up to ₹60,000 cancels the slab tax entirely, so net liability is nil. For salaried taxpayers the ceiling rises to ₹12,75,000 of gross salary once the ₹75,000 standard deduction is applied.
Does the ₹12 lakh rebate cover capital gains?
No. The Section 87A rebate does not apply to income taxed at special rates. Long-term capital gains taxed at 12.5% and short-term gains at 20% under Section 111A fall outside the rebate and are taxed even if your total income is below ₹12 lakh.
Which regime is the default if I do nothing?
The new regime under Section 115BAC is the default for FY 2025-26. You must actively opt for the old regime if you want to claim deductions like 80C, 80D, HRA and home loan interest.
Can senior citizens get a higher exemption under the new regime?
No. The new regime applies a flat ₹4,00,000 basic exemption to all ages. The age-based higher exemptions of ₹3,00,000 and ₹5,00,000 exist only under the old regime.
What surcharge applies on high incomes?
Surcharge is 10% above ₹50 lakh, 15% above ₹1 crore, and 25% above ₹2 crore. The new regime caps the top surcharge at 25%, removing the 37% rate that applies in the old regime. A 4% health and education cess applies on tax plus surcharge in both regimes.
Can I switch regimes every year?
Salaried taxpayers can choose the regime afresh each assessment year. Taxpayers with business or professional income who opt out of the new regime face restrictions on switching back, so the decision needs more planning.
Sources: Finance Act 2025 and the Income Tax Act 1961, specifically Section 115BAC (new regime slabs and default status), Section 87A (rebate limits), the standard deduction provisions under Section 16, and the surcharge and Health and Education Cess rules as notified by the Central Board of Direct Taxes for AY 2026-27. Figures verified against the rate schedule effective 1 April 2025. For a computation on your own numbers, consult a Chartered Accountant.