New Tax Regime FY 2025-26 —
Zero Tax up to Rs 12.75 Lakh
The revised new-regime slabs, the Rs 60,000 Section 87A rebate that makes income up to Rs 12 lakh tax-free, the Rs 75,000 standard deduction, and exactly when the old regime still saves you more.
For FY 2025-26 (AY 2026-27) the new tax regime is the default. Budget 2025 revised the slabs and raised the Section 87A rebate to Rs 60,000, so an individual with total income up to Rs 12 lakh pays zero tax — no investment needed. With the Rs 75,000 standard deduction, a salaried person earning up to Rs 12.75 lakh gross pays nothing. The top slab of 30% now starts above Rs 24 lakh. Most deductions (80C, 80D, HRA, home-loan interest) remain old-regime only.
The Rs 60,000 rebate is capped at the tax payable and applies only when total income does not exceed Rs 12 lakh — cross that even by Re 1 and the rebate is lost (marginal relief then limits the jump). The rebate also does not cover special-rate income such as short-term capital gains on equity (u/s 111A) or long-term gains (u/s 112A).
New Regime Slabs FY 2025-26 — Full Calculation
Seven slabs now replace the earlier six. The cumulative tax below is before the 87A rebate and before 4% cess. The same rates apply to all age groups.
| Income Slab | Rate | Tax on Slab | Cumulative Tax |
|---|---|---|---|
| Rs 0 – 4,00,000 | Nil | Rs 0 | Rs 0 |
| Rs 4,00,001 – 8,00,000 | 5% | Rs 20,000 | Rs 20,000 |
| Rs 8,00,001 – 12,00,000 | 10% | Rs 40,000 | Rs 60,000 |
| Rs 12,00,001 – 16,00,000 | 15% | Rs 60,000 | Rs 1,20,000 |
| Rs 16,00,001 – 20,00,000 | 20% | Rs 80,000 | Rs 2,00,000 |
| Rs 20,00,001 – 24,00,000 | 25% | Rs 1,00,000 | Rs 3,00,000 |
| Above Rs 24,00,000 | 30% | — | — |
Add 4% Health & Education Cess on total tax. Surcharge applies above Rs 50 lakh; the maximum surcharge is capped at 25% in the new regime (the 37% band is removed). 87A rebate of Rs 60,000 zeroes the tax up to Rs 12L income.
How Salary up to Rs 12.75 Lakh Becomes Zero Tax
A salaried person first reduces gross salary by the Rs 75,000 standard deduction. If the resulting taxable income is Rs 12 lakh or less, the Rs 60,000 rebate wipes out the whole tax bill.
Salary Rs 12.75L — zero tax
Salary Rs 15L — rebate lost
| Gross Salary | Std Deduction | Taxable | Tax Before Rebate | 87A | Net Tax |
|---|---|---|---|---|---|
| Rs 7,00,000 | Rs 75,000 | Rs 6,25,000 | Rs 21,250 | Rs 21,250 | Rs 0 |
| Rs 10,00,000 | Rs 75,000 | Rs 9,25,000 | Rs 45,000 | Rs 45,000 | Rs 0 |
| Rs 12,75,000 | Rs 75,000 | Rs 12,00,000 | Rs 60,000 | Rs 60,000 | Rs 0 |
| Rs 15,00,000 | Rs 75,000 | Rs 14,25,000 | Rs 93,750 | Nil | Rs 97,500 +cess |
| Rs 20,00,000 | Rs 75,000 | Rs 19,25,000 | Rs 1,98,750 | Nil | Rs 2,06,700 |
Illustrative; figures before 4% cess where marked. The 87A rebate applies only when taxable income (after standard deduction) is Rs 12 lakh or less.
Want the exact number for your salary and both regimes?
Use the Income Tax Calculator →New Regime vs Old Regime — FY 2025-26
The new regime gives lower rates and a large rebate but almost no deductions. The old regime keeps 80C, 80D, HRA and home-loan interest, so it can still win when your deductions are high.
New regime (default)
- Basic exemption Rs 4 lakh
- Zero tax up to Rs 12L income (87A Rs 60,000)
- Standard deduction Rs 75,000 (salaried)
- No 80C / 80D / HRA / 24(b) — only 80CCD(2) & 80JJAA
- Max surcharge capped at 25%
- Simplest when deductions are low
Old regime (opt-in)
- Basic exemption Rs 2.5 lakh
- 87A rebate up to Rs 5L income (Rs 12,500)
- Standard deduction Rs 50,000 (salaried)
- Full 80C Rs 1.5L, 80D, HRA, 24(b) home-loan interest
- Surcharge up to 37% above Rs 5 crore
- Best when total deductions are high
The new regime is applied automatically unless you opt out. If your combined deductions (80C + 80D + HRA + home-loan interest) are large — roughly above Rs 8-8.5 lakh at higher incomes — the old regime can still be cheaper. Salaried taxpayers can switch each year; those with business income can move to the old regime only once. Compare both before you file.
New regime suits you if
- Your income is up to Rs 12.75 lakh (salary) — likely zero tax
- You claim few or no deductions
- You want a simpler return with no proof-gathering
- You are early-career or rent-free / no home loan
Old regime may win if
- You max 80C, 80D and pay home-loan interest (24b)
- You claim large HRA in a metro
- Your total deductions exceed the rate benefit
- You have let-out property interest to set off
Not sure which regime is cheaper for you?
Compare with an expert →Deductions Under the New Regime
The new regime relies on the higher rebate and standard deduction instead of tax-saving investments. Most Chapter VI-A deductions are switched off; a short list survives.
| Deduction / Exemption | New Regime | Old Regime |
|---|---|---|
| Standard deduction (salaried) | Rs 75,000 | Rs 50,000 |
| Section 80C (Rs 1.5L) | No | Yes |
| Section 80D (health insurance) | No | Yes |
| 80CCD(1B) NPS (Rs 50,000) | No | Yes |
| 80CCD(2) employer NPS | Yes | Yes |
| HRA exemption | No | Yes |
| Home-loan interest 24(b), self-occupied (Rs 2L) | No | Yes |
| 87A rebate | Up to Rs 12L | Up to Rs 5L |
Under the new regime only the employer NPS contribution u/s 80CCD(2) and the Section 80JJAA employment deduction remain; the salaried standard deduction is higher at Rs 75,000.
How to Choose and Claim the Right Regime
Because the new regime is the default, you must actively opt for the old regime. Salaried taxpayers indicate this in the ITR each year; taxpayers with business or professional income file Form 10-IEA to opt out, and the switch back for them is generally a once-only choice. Missing the deadline can lock you into the default.
Want us to compare both regimes and file your return accurately?
Get ITR Filing Help →New Tax Regime 2025-26 — Frequently Asked Questions
Related TaxClue Services
Next in this income-tax cluster
New or Old Regime — We Pick the One That Saves You More
Our CA-led team compares both regimes on your actual income, factors in 80C, 80D, HRA and home-loan interest, and files your ITR accurately for FY 2025-26 — 100% online, across India.