The Finance Act 2025 default new regime: revised 115BAC slabs that apply for FY 2025-26

The new tax regime under Section 115BAC of the Income-tax Act, 1961 is no longer the optional alternative it was when introduced by the Finance Act 2020. Since assessment year 2024-25 it is the default regime, and the Finance Act 2025 rewrote its slabs so that a salaried resident earning up to Rs 12,00,000 in total income now pays zero tax after rebate. For FY 2025-26 (AY 2026-27), the return applicable to a salaried individual on the Income Tax Department's own help portal confirms the seven-band structure below. This is the regime your employer will apply to your salary unless you actively opt out in the prescribed manner.

What the Section Says

Section 115BAC provides a concessional slab structure in exchange for giving up most deductions and exemptions. Following the Finance Act 2025 amendment, the tax on total income of an individual, Hindu Undivided Family, association of persons, body of individuals or artificial juridical person for AY 2026-27 is computed as follows.

The same slabs can be read as a cumulative-tax table, which is how the arithmetic is usually shown on assessment orders. Every band adds a fixed base amount to the marginal rate on the excess:

Three features sit on top of these slabs. First, a standard deduction of Rs 75,000 is available to salaried taxpayers and pensioners in the new regime, higher than the Rs 50,000 allowed in the old regime. Second, a Section 87A rebate of up to Rs 60,000 wipes out tax entirely where total income does not exceed Rs 12,00,000. Third, a health and education cess of 4% is levied on the sum of tax and any surcharge. These three constants, together with the seven slabs above, are the whole machinery of a new-regime salary computation. The new regime being the default since AY 2024-25 (Finance Act 2023, effective from that year) means the burden is on you to opt for the old regime if it suits you better, by filing the prescribed form before the due date.

You can model any of this yourself using our income tax calculator or the regime-specific new regime calculator. To decide whether the default is actually cheaper for you, run the old-vs-new comparison.

Worked Example

Take Meera, a salaried resident in Bengaluru with a gross salary of Rs 20,00,000 for FY 2025-26 and no other income. She has not opted for the old regime, so Section 115BAC applies by default.

Step 1 - Net taxable salary. From her gross of Rs 20,00,000 she claims the standard deduction of Rs 75,000. Her total income is therefore Rs 19,25,000. Note that under the new regime she cannot also claim house rent allowance, Section 80C investments, or the Rs 1,50,000 of typical old-regime deductions - the standard deduction is essentially the only subtraction available to her.

Step 2 - Slab tax. Applying the seven bands to Rs 19,25,000:

The cumulative-table shortcut gives the same figure: Rs 1,20,000 + 20% of (19,25,000 - 16,00,000) = Rs 1,20,000 + Rs 65,000 = Rs 1,85,000.

Step 3 - Rebate check. Her total income of Rs 19,25,000 exceeds Rs 12,00,000, so the Section 87A rebate is not available. No relief applies here.

Step 4 - Cess. Health and education cess at 4% on Rs 1,85,000 is Rs 7,400. Her final tax liability is Rs 1,92,400.

Now contrast Meera with her colleague Arjun, whose gross salary is Rs 12,75,000. After the Rs 75,000 standard deduction his total income is exactly Rs 12,00,000. His slab tax is Rs 20,000 (the 4-8 lakh band) plus Rs 40,000 (the 8-12 lakh band) = Rs 60,000. Because his total income does not exceed Rs 12,00,000, the Section 87A rebate of up to Rs 60,000 cancels the entire liability. Arjun pays nil tax, while Meera pays Rs 1,92,400 - a stark illustration of how the Rs 12,00,000 rebate threshold shapes take-home pay. Read more on how this rebate works in our tax rebate glossary entry.

Common Mistakes

Scrutiny of new-regime returns for AY 2024-25 and AY 2025-26 surfaced a recurring set of errors. The most expensive ones flow from confusing the two regimes.

Claiming old-regime deductions inside the new regime. Taxpayers routinely enter Section 80C, 80D, HRA or home-loan interest in a return filed under Section 115BAC. These are disallowed in the default regime and the Centralised Processing Centre raises a demand under Section 143(1) for the shortfall. The Rs 75,000 standard deduction and the employer's Section 80CCD(2) contribution to NPS are among the few subtractions the new regime does permit.

Assuming Section 80CCD(1B) works in the new regime. The additional Rs 50,000 deduction for a self-contribution to the National Pension System under Section 80CCD(1B) is NOT allowed in the new regime - it is not available under Section 115BAC and can be claimed only in the old regime. If you value that deduction, run the old-vs-new comparison before opting out of the default.

Believing the Rs 12,00,000 rebate makes income up to Rs 12,00,000 tax-free by exemption. It does not. Tax is first computed on the full slabs and then the Section 87A rebate extinguishes it. The distinction matters the moment income crosses Rs 12,00,000, because the rebate falls away and marginal relief - not exemption - is what softens the jump. A salaried person earning slightly above Rs 12,00,000 of total income should check whether marginal relief caps the tax at the amount by which income exceeds the threshold.

Forgetting the 4% cess. Some taxpayers quote a tax figure without adding the health and education cess, understating their liability by 4%. The cess applies to the aggregate of tax and surcharge, and appears as a separate line on the assessment. See our cess glossary entry for how it is computed.

Over-stating surcharge in the new regime. For high earners, the maximum surcharge under the new regime is capped at 25% - the 37% rate that existed for very high incomes applies only in the old regime. Getting this wrong overstates liability on incomes above Rs 5 crore. Our surcharge glossary entry sets out the slabs.

FAQ

Is the new tax regime compulsory for FY 2025-26?

No. Section 115BAC is the default regime since AY 2024-25, but you may still opt for the old regime. A salaried person with no business income exercises the choice each year simply by selecting the old regime in the return before the due date; a taxpayer with business or professional income must file Form 10-IEA to opt out, and the option to switch back is restricted. Verify the current-year procedure on incometax.gov.in.

What is the tax-free income limit under the new regime?

For FY 2025-26, a resident individual with total income up to Rs 12,00,000 pays no tax after the Section 87A rebate of up to Rs 60,000. For a salaried person, adding the Rs 75,000 standard deduction means a gross salary of up to Rs 12,75,000 can translate to nil tax. Above Rs 12,00,000 of total income the rebate is withdrawn and normal slab tax applies, subject to marginal relief.

Can I claim Section 80C and 80D deductions in the new regime?

No. Chapter VI-A deductions such as Section 80C (up to Rs 1,50,000), Section 80D health insurance premium and Section 80CCD(1B) are not allowed in the new regime under Section 115BAC. The main exceptions the new regime allows are the Rs 75,000 standard deduction for salary or pension income and the employer's contribution to NPS under Section 80CCD(2).

How much standard deduction do salaried taxpayers get?

The standard deduction in the new regime is Rs 75,000 for FY 2025-26, against Rs 50,000 in the old regime. It is a flat subtraction from salary or pension income and requires no proof or investment.

What surcharge applies to high incomes in the new regime?

Surcharge applies at 10% for total income between Rs 50 lakh and Rs 1 crore, 15% between Rs 1 crore and Rs 2 crore, and 25% above Rs 2 crore. The highest surcharge in the new regime is capped at 25%; the 37% band applies only in the old regime. Health and education cess of 4% is then levied on tax plus surcharge.

Do I need to file a separate form to stay in the new regime?

No. Because the new regime is the default, a salaried taxpayer who wants it simply files the return without opting out - no additional form is required. Only a taxpayer choosing the old regime needs to act, and one with business income must file Form 10-IEA to do so.

Where can I verify these slabs officially?

The slabs and the return applicable to salaried individuals for AY 2026-27 are published on the Income Tax Department portal at incometax.gov.in, and the statutory rates flow from the Finance Act 2025 as enacted. Always cross-check the current year's figures against the primary source before filing.