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Budget 2025: Check the updated income tax slabs, rates, and deductions announced in Union Budget 2025-26. Compare the new tax regime with the old to determine which benefits you the most.
Income Tax: Know difference between new tax regime vs old tax regime after the Union Budget 2025-26.
Latest Income Tax Slabs, Rates In Budget 2025: As widely expected, Finance Minister Nirmala Sitharaman on Saturday announced huge income tax relaxations in the first full Budget of the Modi 3.0 government. Income up to Rs 12 lakh of normal income, other than capital gains income, is tax free. Here are the latest slabs and rates of income tax under the new tax regime for the financial year 2025-26 for those earning above Rs 12 lakh.
The income tax relaxation will give much-needed boost to the consumption in the economy. Here’s the current income tax rates and slabs under the new tax regime (FY 2025-26).
- Income up to Rs 4,00,000: Nil
- Income from Rs 4,00,001 to Rs 8,00,000: 5%
- Income from Rs 8,00,001 to Rs 12,00,000: 10%
- Income from Rs 12,00,001 to Rs 16,00,000: 15%
- Income from Rs 16,00,001 to Rs 20,00,000: 20%
- Income from Rs 20,00,000 to Rs 24,00,000: 25%
- Income above Rs 24,00,000: 30%
Importantly, those earning up to Rs 12 lakh a year will have to pay no tax on rebate under 87A. Those those earning above, these tax slabs will be applicable under the new tax regime. Those earning up to Rs 12 lakh in a year in the financial year 2025-26 will have to pay no tax as part of rebate under Section 87A of the Income Tax Act, 1961.
Also, effectively those earning up to Rs 13 lakh will now be able save income tax as over and above the Rs 12 lakh income limit, there is a standard deduction of Rs 75,000, and a marginal relief of around Rs 30,000.
Income Tax Exemption Limits
2005: ₹1 lakh
2012: ₹2 lakhs
2014: ₹2.5 lakhs
2019: ₹5 lakhs
2023: ₹7 lakhs
2025: ₹12 lakhs
The old tax regime remains the same. Following were the slabs till now:
Current Tax Slabs Under the Old Tax Regime (Applicable FY 2024-25, FY 2025-26)
The Old Tax Regime, while retaining higher rates, has allowed taxpayers to claim various exemptions and deductions. Here are the slabs:
- Income up to Rs 2,50,000: Nil
- Income from Rs 2,50,001 to Rs 7,00,000: 5%
- Income from Rs 7,00,001 to Rs 10,00,000: 10%
- Income from Rs 10,00,001 to Rs 12,00,000: 15%
- Income from Rs 12,00,001 to Rs 15,00,000: 20%
- Income above Rs 15,00,000: 30%
For senior citizens aged 60-80 years, the basic exemption limit is Rs 3,00,000. For super senior citizens (above 80 years), it is Rs 5,00,000.
The Old Tax Regime allows deductions under various sections, such as:
Section 80C: Up to Rs 1,50,000 for investments like PPF, ELSS, and LIC premiums.
Section 80D: Health insurance premiums.
Section 24(b): Interest on home loan up to Rs 2,00,000.
Other exemptions like HRA and LTA.
Tax Slabs Under the New Tax Regime Till Now (Applicable FY 2024-25)
The New Tax Regime, introduced in the Budget 2020, offered lower tax rates but fewer exemptions and deductions. Here are the current tax slabs till now (before the Budget 2025):
- Income up to Rs 3,00,000: Nil
- Income from Rs 3,00,001 to Rs 7,00,000: 5% (tax rebate under Section 87A up to Rs 7 lakh)
- Income from Rs 7,00,001 to Rs 10,00,000: 10%
- Income from Rs 10,00,001 to Rs 12,00,000: 15%
- Income from Rs 12,00,001 to Rs 15,00,000: 20%
- Income above Rs 15,00,000: 30%
This was the made default tax regime in the previous budget 2024. Under this regime, taxpayers can opt for lower rates but must forgo popular exemptions like HRA, LTA, and deductions under Sections 80C, 80D, and others.
However, taxpayers can avail of a standard deduction. The standard deduction limit for salaried employees was increased to Rs 75,000 in the Budget 2024-25. For family pensioners, it was hiked to Rs 25,000.
Choosing between the New and Old Tax Regime depends on an individual’s financial profile. The New Tax Regime is more suitable for those who prefer simplicity and have minimal investments. Conversely, the Old Tax Regime benefits taxpayers who maximise exemptions and deductions.
FM Nirmala Sitharaman in the last Budget 2024-25 in July announced a comprehensive review of the Income Tax Act. Following this, the review committee was constituted led by Chief Commissioner of Income Tax V K Gupta.
A new income tax code will be tabled in Parliament next week to simplify the income tax provisions, informed FM Nirmala Sitharaman during Budget Speech 2025-26 on Saturday.
