India New Tax Regime Slabs FY 2025-26 Explained

For FY 2025-26 (assessment year 2026-27), the new tax regime is the default for individual taxpayers in India. If you do nothing, your employer will deduct TDS on your salary under the new regime, and your return will be processed on that basis unless you actively choose the old regime when filing. Understanding the new slabs is therefore the starting point for almost every salaried person in the country.

The slabs are: nil up to ₹4,00,000; 5% from ₹4,00,001 to ₹8,00,000; 10% from ₹8,00,001 to ₹12,00,000; 15% from ₹12,00,001 to ₹16,00,000; 20% from ₹16,00,001 to ₹20,00,000; 25% from ₹20,00,001 to ₹24,00,000; and 30% above ₹24,00,000. These are progressive, so each rate applies only to the slice of income inside that band. A taxable income of ₹12 lakh carries slab tax of ₹20,000 on the 5% band plus ₹40,000 on the 10% band — ₹60,000 in total.

That ₹60,000 is exactly what the enhanced Section 87A rebate wipes out. Resident individuals with taxable income up to ₹12 lakh under the new regime receive a rebate equal to their tax, up to ₹60,000, so their liability becomes zero. Salaried employees and pensioners also receive a standard deduction of ₹75,000, which is why a gross salary of ₹12.75 lakh ends up completely tax-free.

Just above the threshold, marginal relief applies. Without it, someone earning ₹12.1 lakh taxable would suddenly owe more than ₹60,000 on just ₹10,000 of extra income. The law limits the tax so that it does not exceed the income above ₹12 lakh. Our calculator applies this relief automatically, which is why tax rises gradually rather than jumping.

Note that the rebate does not cover income taxed at special rates, such as short-term and long-term capital gains on listed shares and equity mutual funds. If you sold investments during the year, those gains are taxed separately even if your salary falls under the rebate limit.

On top of the computed tax, a 4% health and education cess is charged. A surcharge also applies to very high incomes above ₹50 lakh, capped at 25% under the new regime. Most salaried readers will never reach that level, but it is worth knowing if your income includes large bonuses or ESOP gains.

What the new regime takes away is the long list of deductions. Section 80C investments, 80D health insurance premiums, HRA exemption, leave travel allowance and home-loan interest on a self-occupied house are not available. A few items survive: the standard deduction, the employer's contribution to NPS under Section 80CCD(2), and family pension deductions.

For most people with modest investments, the lower rates and higher rebate outweigh the lost deductions. People with large HRA claims, full 80C use and a home loan should compare both regimes before filing. Use the TaxSaathi India Income Tax Calculator to see both numbers side by side, and confirm with the official Income Tax Department calculator before you file.