The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, introduced significant changes in income tax slabs, primarily under the new tax regime. These changes provide much-needed relief to salaried individuals, particularly the middle class. One of the biggest highlights is zero tax on annual income up to ₹12 lakh under the new tax regime, owing to a hike in the Section 87A rebate limit.
Key Highlights of Income Tax Changes in Budget 2025-26:
- No Income Tax for Salaried Individuals Earning Up to ₹12 Lakh in New Regime
- Basic Exemption Limit Increased from ₹3 Lakh to ₹4 Lakh
- Section 87A Rebate Limit Increased from ₹25,000 to ₹60,000
- New Income Tax Slabs Introduced Under the New Tax Regime
- Old Tax Regime Remains Unchanged
Let’s break down the new tax slabs and compare them with the old tax regime
New Income Tax Slabs for FY 2025-26 (AY 2026-27)
Under the new tax regime, the government has introduced revised slabs to simplify taxation and provide tax relief to middle-income earners.
Income Tax Slabs Under New Regime (Post-Budget 2025-26)
Annual Income (₹) | Tax Rate (%) |
---|---|
Up to ₹4,00,000 | No Tax |
₹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% |
How Does Income of ₹12 Lakh Become Tax-Free?
The increase in the Section 87A rebate limit plays a key role in making incomes up to ₹12 lakh tax-free.
– Previously, the 87A rebate was available for incomes up to ₹7 lakh, with a rebate of ₹25,000.
– Now, this rebate has been extended to incomes up to ₹12 lakh, with a maximum rebate of ₹60,000.
– This means that taxpayers earning up to ₹12 lakh will not have to pay any tax.
Income Tax Slabs Under Old Tax Regime (Unchanged in Budget 2025-26)
Income Tax Slabs for FY 2025-26 (Old Regime)
Annual Income (₹) | Tax Rate (%) |
---|---|
Up to ₹2,50,000 | No Tax |
₹2,50,001 – ₹5,00,000 | 5% |
₹5,00,001 – ₹10,00,000 | 20% |
Above ₹10,00,000 | 30% |
Standard Deduction (Unchanged):
₹50,000 under the old tax regime.
₹75,000 under new tax regime.
Comparison: New Tax Regime (Post-Budget 2025) vs Old Tax Regime
Aspect | New Tax Regime (Post-Budget 2025) | Old Tax Regime |
---|---|---|
Basic Exemption Limit | ₹4,00,000 | ₹2,50,000 |
Zero Tax Income Limit | ₹12,00,000 (with 87A rebate) | ₹5,00,000 (with 87A rebate) |
Section 87A Rebate | ₹60,000 (for income up to ₹12 lakh) | ₹12,500 (for income up to ₹5 lakh) |
Deductions (80C, 80D, HRA, etc.) | Not available | Available |
Tax Calculation Simplicity | Easier | More complex |
ALSO READ: Budget 2025: Finance Minister Announces Major Tax Relief for Middle-Class