Income Tax Under the New Regime: A Complete Guide for FY 2025-26
The new income tax regime, introduced via Section 115BAC of the Income Tax Act, has become the default tax regime for all individual taxpayers from Financial Year 2023-24 onwards. With the Union Budget 2025 revisions, the new regime has become significantly more attractive with revised slab structure featuring seven income brackets, a higher Section 87A rebate of Rs 60,000 (for income up to Rs 12 lakh), and the unchanged standard deduction of Rs 75,000.
New Regime Tax Slabs for FY 2025-26 (AY 2026-27)
The current slab structure under the new regime offers seven income brackets with progressive rates. Income up to Rs 4,00,000 is fully exempt. The 5% slab covers income between Rs 4 lakh and Rs 8 lakh, followed by 10% for Rs 8-12 lakh, 15% for Rs 12-16 lakh, 20% for Rs 16-20 lakh, 25% for Rs 20-24 lakh, and 30% for income exceeding Rs 24 lakh.
A key advantage of the new regime is the Section 87A rebate. If your total taxable income (after the standard deduction) does not exceed Rs 12,00,000, you receive a rebate of up to Rs 60,000, effectively making your entire tax liability nil. This means salaried individuals earning up to Rs 12,75,000 (Rs 12 lakh plus Rs 75,000 standard deduction) pay zero income tax.
Standard Deduction Under the New Regime
For FY 2025-26, salaried employees and pensioners get a standard deduction of Rs 75,000 under the new regime. This is an automatic deduction from gross salary income — no bills or proof of expenditure are needed.
Deductions Available Under the New Regime
While the new regime eliminates most exemptions, certain deductions remain:
- Standard Deduction (Rs 75,000): Available for salaried individuals and pensioners.
- Employer NPS Contribution — Section 80CCD(2): Employer contributions to NPS up to 14% of salary (central government employees) or 10% of salary (others) are deductible.
- Family Pension Deduction: Up to Rs 15,000 or one-third of the pension, whichever is lower.
Who Should Choose the New Regime?
The new regime is typically more beneficial if your total deductions under Section 80C, 80D, and other sections are relatively low (below Rs 3-4 lakh depending on income level), you do not claim HRA exemption, or you want simplicity without maintaining investment records. Use our Old vs New Regime Comparison Calculator to determine which regime saves you more.
Key Changes in Union Budget 2025
The Union Budget 2025 introduced a major overhaul: the nil-tax slab was raised from Rs 3 lakh to Rs 4 lakh, and the Section 87A rebate was raised from Rs 25,000 (for income up to Rs 7 lakh) to Rs 60,000 (for income up to Rs 12 lakh), making salary income up to Rs 12.75 lakh effectively tax-free.
Disclaimer
This calculator is designed for Indian resident individuals and HUFs for FY 2025-26 (AY 2026-27). It does not account for special incomes (lottery, horse racing), agricultural income, or corporate taxpayer rules. Consult a qualified Chartered Accountant for personalized tax advice.