New Tax Regime 2025-26 — Slabs, Deductions & Comparison with Old Regime

Q: Can I switch between new and old tax regime?

Salaried employees can choose their regime every year — declare to employer at the start of year for TDS purposes (can change at ITR filing). Business income taxpayers: can switch from old to new once (and back to old once in their lifetime). If you have business income under Section 44AD/44ADA (presumptive), switching back from new to old means you cannot use presumptive taxation for 5 years. Deadline to choose: ITR filing due date (31 July 2026 for FY 2025-26 for non-audit cases).

Updated: 3 June 2026 | Budget 2025 Slabs | Income-tax Act 2025 | FY 2025-26 / AY 2026-27

The new tax regime for FY 2025-26 has slabs: 0% up to ₹4L, 5% (₹4–8L), 10% (₹8–12L), 15% (₹12–16L), 20% (₹16–20L), 25% (₹20–24L), 30% (above ₹24L). Section 87A rebate of ₹25,000 makes income up to ₹12 lakh effectively tax-free. Add ₹75,000 standard deduction → salaried persons with gross salary up to ₹12.75 lakh pay zero tax. No 80C, HRA, or home loan deductions in new regime. Default regime from FY 2023-24.

₹12.75L

Zero income tax for salaried employees with gross salary up to ₹12.75 lakh in new regime.
₹12L (87A rebate ceiling) + ₹75K standard deduction = ₹12.75L effectively tax-free. Budget 2025 enhancement.

New Tax Regime Slabs — FY 2025-26 (AY 2026-27)

Income Slab	Tax Rate	Tax on Slab	Cumulative Tax
₹0 – ₹4,00,000	0%	₹0	₹0
₹4,00,001 – ₹8,00,000	5%	₹20,000	₹20,000
₹8,00,001 – ₹12,00,000	10%	₹40,000	₹60,000
₹12,00,001 – ₹16,00,000	15%	₹60,000	₹1,20,000
₹16,00,001 – ₹20,00,000	20%	₹80,000	₹2,00,000
₹20,00,001 – ₹24,00,000	25%	₹1,00,000	₹3,00,000
Above ₹24,00,000	30%	—	₹3,00,000 + 30% above ₹24L

Plus 4% Health & Education Cess on total tax. Surcharge: 10% on income ₹50L–₹1Cr; 15% on ₹1–2Cr; 25% on ₹2–5Cr; 25% (capped) above ₹5Cr. Section 87A rebate of ₹25,000 reduces tax to zero for income ≤ ₹12 lakh.

New vs Old Tax Regime — Comparison

Feature	New Regime (Default)	Old Regime
Tax rates	Lower slabs, wider bands	Higher rates (5%/20%/30%)
Section 80C	Not available	Up to ₹1.5 lakh
Section 80D	Not available	₹25K–₹1L (health insurance)
HRA exemption	Not available	Available (actual/50%/40% of basic)
Home loan interest (24b)	Not available	₹2 lakh (self-occupied)
Standard deduction	₹75,000	₹50,000
Section 87A rebate	₹25,000 (income ≤ ₹12L)	₹12,500 (income ≤ ₹5L)
80CCD(2) employer NPS	Available (up to 14%)	Available (up to 10%)
Default regime	Yes (from FY 2023-24)	Must opt-in
Best for	Low deductions, income ≤ ₹12.75L	High deductions (₹3L+)

What Deductions Are Available in New Tax Regime?

Available in New Regime

Standard deduction: ₹75,000
Section 87A rebate: ₹25,000
80CCD(2): Employer NPS contribution
80JJAA: New employee deduction
Gratuity exemption (up to ₹20L)
Leave encashment (up to ₹25L)
Family pension deduction
Interest on savings account (80TTA) — NOT available

NOT Available in New Regime

Section 80C (PPF/ELSS/LIC/PF): ₹1.5L
Section 80D (health insurance): ₹25K–₹1L
Section 24(b) home loan interest: ₹2L
HRA exemption
LTA (Leave Travel Allowance)
Section 80E (education loan)
Section 80G (donations)
Professional tax deduction
80TTA (savings interest ₹10K)
Section 80GG (rent deduction)

New Regime Tax Calculation Example

Example	Gross Salary ₹15L	Gross Salary ₹20L
Gross income	₹15,00,000	₹20,00,000
Standard deduction	– ₹75,000	– ₹75,000
Taxable income	₹14,25,000	₹19,25,000
Tax on slabs	₹20K+40K+42,750 = ₹1,02,750	₹20K+40K+60K+65K = ₹1,85,000
4% H&E Cess	₹4,110	₹7,400
Total tax	₹1,06,860	₹1,92,400

Frequently Asked Questions

What are the income tax slabs under the new tax regime for FY 2025-26?

New tax regime slabs for FY 2025-26 (Income-tax Act 2025): ₹0–4 lakh: 0%; ₹4–8 lakh: 5%; ₹8–12 lakh: 10%; ₹12–16 lakh: 15%; ₹16–20 lakh: 20%; ₹20–24 lakh: 25%; Above ₹24 lakh: 30%. Section 87A rebate: ₹25,000 for income up to ₹12 lakh → effectively zero tax for total income ≤ ₹12 lakh. Standard deduction: ₹75,000 (salaried). This makes salary income up to ₹12.75 lakh effectively tax-free.

Which deductions are NOT available in the new tax regime?

Deductions NOT available under new tax regime: Section 80C (PPF, ELSS, LIC, PF — ₹1.5L); Section 80D (health insurance); Section 80E (education loan); Section 80G (donations); Section 24(b) (home loan interest ₹2L); HRA exemption; LTA exemption; Professional tax deduction; Section 80TTA (savings interest); Section 80GG (rent for non-HRA employees). Essentially all chapter VI-A deductions except 80CCD(2) and 80JJAA are not available.

What deductions ARE available in the new tax regime?

Deductions available in new tax regime: Standard deduction ₹75,000 (salaried/pensioners); Section 80CCD(2) — employer NPS contribution (up to 14% for central govt employees, 10% for others); Section 80JJAA — new employee hiring (for businesses); Gratuity exemption; Leave encashment exemption (₹25L ceiling); Family pension deduction (₹15,000 or 33.33%, whichever less); Agniveer Corpus Fund (80CCH). All these are available in new regime.

Which tax regime is better — new or old for FY 2025-26?

New regime is generally better if: (1) You have few deductions (< ₹2.5–3L total); (2) Your income is below ₹12.75L (effectively zero tax with standard deduction + 87A); (3) You are a young professional not heavily invested in tax-saving instruments. Old regime is better if: (1) You have HRA + home loan interest (₹2L) + 80C (₹1.5L) + 80D (₹25K) = ₹5L+ deductions; (2) Income in 20–30% slab and deductions are large. Use a tax calculator to compare.

Can I switch between new and old tax regime?

Salaried employees can choose their regime every year — declare to employer at the start of year for TDS purposes (can change at ITR filing). Business income taxpayers: can switch from old to new once (and back to old once in their lifetime). If you have business income under Section 44AD/44ADA (presumptive), switching back from new to old means you cannot use presumptive taxation for 5 years. Deadline to choose: ITR filing due date (31 July 2026 for FY 2025-26 for non-audit cases).

Income Tax Slabs 2025-26 Tax Calculator Section 87A Rebate Standard Deduction File ITR Budget 2025 Changes NPS 80CCD(2)

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