(A practical, SEO-optimized guide to help salaried Indians choose the right regime)
Meta (for SEO): Income tax slab 2025-26 comparison — new regime vs old regime. Updated FY 2025–26 tax slabs, Section 87A rebate, examples, who should opt for which regime and bite-size tables to help you decide.
Quick summary (TL;DR)
- New regime (Budget 2025 changes): Revised slabs make incomes up to ₹12,00,000 effectively tax-free for many taxpayers (full rebate under Section 87A) and introduce lower, more granular slab rates above that. This was announced in Budget 2025. ReutersClearTax
- Old/legacy regime: The familiar slab structure (0–2.5L, 2.5–5L, 5–10L, >10L) remains available — it still allows popular deductions (80C, 80D, HRA, home-loan interest etc.), which may make it better for those with large exemptible investments/expenses. ClearTaxIndiaFilings
- Bottom line: New regime simplifies taxes and benefits middle-income earners; old regime can still win for people who claim big deductions. Use a quick calculator (or the examples below) to compare.
What changed in Budget 2025 (what matters)
The key, load-bearing changes announced in Budget 2025 that affect FY 2025–26 are:
- Higher rebate under Section 87A — taxpayers with net taxable income up to ₹12,00,000 can get a full rebate (zero tax). ReutersThe Times of India
- New slab thresholds & lower marginal rates under the new regime (see the slab table below). Several intermediate slabs were added to spread marginal rates smoothly. ClearTaxTaxGuru
- Standard deduction / allowances: Budget commentary and press coverage noted a standard deduction benefit (as applied in illustrations) that improves disposal income for many salaried taxpayers; check your final pay-slip and ITR computations. Reuters
Note: Slabs and rebate are subject to the Finance Act and CBDT notifications; always confirm exact phrasing on official tax portals or with your tax advisor before filing.
Official slab tables — New vs Old (FY 2025–26)
New regime — FY 2025–26 (simplified, more brackets)
| Taxable 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% |
(Rebate under Section 87A applies up to ₹12,00,000 — meaning many taxpayers with taxable income ≤ ₹12L pay zero tax under the new regime after rebate.) ClearTaxThe Times of India
Old regime — FY 2025–26 (legacy, deductions allowed)
| Taxable income (₹) | Tax rate |
|---|---|
| Up to 2,50,000 | Nil |
| 2,50,001 – 5,00,000 | 5% |
| 5,00,001 – 10,00,000 | 20% |
| Above 10,00,000 | 30% |
(Under the old regime you can still claim common deductions such as Section 80C (investments up to ₹1.5L), 80D (health insurance), HRA, home-loan interest (Sec 24) etc.).) IndiaFilings
How to compare (step-by-step recommendation)
- Start with taxable income after all deductions you actually claim (standard deduction, 80C, 80D, HRA, etc.). If you don’t want to claim deductions, new regime may be simpler.
- Compute tax under both regimes (apply rebate and cess). Remember Health & Education cess of 4% is applied on tax. ClearTax
- If you get zero tax under the new regime (taxable income ≤ ₹12L after deductions), you’re often better off there because it’s simpler.
- If you have large 80C/other deductions that reduce tax meaningfully, re-check the old regime — it may still save you more.
Illustrative comparison (assumes taxable income = income after claimable deductions)
These are worked examples to show typical outcomes. They assume taxable income already reflects any deductions you’d actually claim — i.e., they are after standard deduction / 80C etc. Cess of 4% is included in totals.
| Taxable income (₹) | Tax under New regime (₹) | Tax under Old regime (₹) |
|---|---|---|
| 8,00,000 | 20,000 (plus cess 4% ⇒ 20,800) | 72,500 (plus cess 4% ⇒ 75,400) |
| 12,00,000 | 0 (Section 87A rebate) | 1,72,500 (plus cess 4% ⇒ 1,79,400) |
| 20,00,000 | 2,00,000 (plus cess 4% ⇒ 2,08,000) | 4,12,500 (plus cess 4% ⇒ 4,29,000) |
| 30,00,000 | 4,80,000 (plus cess 4% ⇒ 4,99,200) | 7,12,500 (plus cess 4% ⇒ 7,41,000) |
(See source slab definitions for how slab tax was calculated.) ClearTaxIndiaFilings
Who should normally prefer the new regime?
- Salaried taxpayers with no/low investments under 80C and limited exemptions to claim.
- Middle-income earners (especially those with taxable income around ₹4–12 lakh) — the new rebate makes many of them tax-free or much lower tax. Reuters
- People who prefer simplicity and fewer proofs/records — fewer deductions to track.
Who should stick with the old regime?
- Taxpayers who have high 80C investments (ELSS, PPF, EPF), substantial home-loan interest, health insurance premiums, or large HRA claims — deductions can make the old regime cheaper. IndiaFilings
- Those who can legally structure salary components and investments to maximise deductions.
Practical tips to decide (actionable)
- Run a two-regime calculation for the current year using taxable income after all deductions you plan to claim. Many tax portals (and employers) now offer “compare regimes” tools. ClearTax
- Don’t assume the new regime is always better — do the math if you have ≥ ₹1.5L in 80C or home-loan interest.
- If your taxable income ≤ ₹12L after deductions, the new regime is probably the simplest and cheapest choice. Reuters
- Review each year before filing — your life (investments, loan interest, salary structure) changes and so will the optimal regime.
- When in doubt, consult a chartered accountant — they’ll factor in rebates, TDS, advance tax and special situations (capital gains, business income, rental income).
Common FAQs
Q. Is the rebate under 87A absolute?
A: The Section 87A rebate applies to taxpayers whose net taxable income (after deductions) is up to the specified threshold; Budget 2025 raised that threshold effectively to ₹12L for eligible taxpayers under the new rules. Always check the exact legal wording when filing. Reuters
Q. Does the old regime still allow the standard deduction?
A: Yes — standard deductions and other legacy exemptions remain under the old regime; exact amounts and applicability depend on the Finance Act and tax rules announced for the financial year. IndiaFilings
Q. Will slabs change next year?
A: Slabs are set by the annual Union Budget and can change; always confirm for the financial year for which you’re filing. Recent changes (Budget 2025) were significant, which is why double-checking matters. Reuters
Final checklist before you file
- Compare tax payable under both regimes using your expected deductions.
- Confirm whether the standard deduction or any employer allowances change your taxable income.
- Factor in cess (4%) and any surcharge applicable at very high incomes.
- If you are close to the ₹12L threshold, small choices (EPF, HRA) can flip the better regime — run the numbers.
Sources & further reading
Key references used to prepare this guide (slabs, Budget 2025 changes and analysis): Cleartax (slab breakdown), Times of India (Budget FAQ/87A explanation), Reuters (budget coverage and policy impact), Economic Times (examples and guidance), IndiaFilings / TaxGuru (detailed slab guides).