Income Tax
Income Tax Slabs for AY 2025-26: New Regime vs Old Regime
Complete income tax slab tables for both regimes under the revised rates announced in Union Budget 2025-26. Includes Section 87A rebate, surcharge calculations, 4% cess, and worked examples for Rs 8L, Rs 12L, and Rs 20L income levels.
0%
Tax up to Rs 12L under new regime (Budget 2025 87A rebate)
30%
Peak marginal rate — above Rs 24L (new) / Rs 10L (old)
4%
Health & Education Cess on tax + surcharge
Rs 60K
Section 87A rebate cap — new regime AY 2025-26
Budget 2025-26 — What Changed in the Tax Slabs?
The Union Budget presented on February 1, 2025 made sweeping changes to the new tax regime slabs, effective from AY 2025-26 (FY 2024-25). The most significant change was the revision of slab thresholds and enhancement of the Section 87A rebate from Rs 25,000 to Rs 60,000, making income up to Rs 12,00,000 effectively tax-free under the new regime. The nil-tax slab was raised from Rs 3 lakh to Rs 4 lakh, a revision of Rs 1 lakh in the basic exemption threshold.
The 5% band was widened from Rs 3–6L to Rs 3–7L in the previous year's revision, and for AY 2025-26 the full revised slab structure now spans seven tax brackets with the highest rate of 30% applying only above Rs 24 lakh — compared to above Rs 10 lakh under the old regime. This structural change in the new regime significantly reduces the marginal rate applicable at moderate income levels, reducing the tax burden even without any deductions.
For salaried employees specifically, the Rs 75,000 standard deduction (introduced in Budget 2024-25) continues in AY 2025-26. This means a salaried employee earning up to Rs 12.75 lakh gross pays zero income tax under the new regime — the Rs 75,000 standard deduction brings taxable income below Rs 12 lakh, which is fully covered by the 87A rebate. This is a substantial improvement from the previous year when the effective zero-tax threshold was Rs 7.75 lakh for salaried employees.
Full Tax Slab Tables — AY 2025-26
New Regime Slabs — AY 2025-26 (Default)
Standard deduction: Rs 75,000 for salaried. 87A rebate: Rs 60,000 for income up to Rs 12L.
Old Regime Slabs — AY 2025-26 (Opt-in via Form 10-IEA)
Standard deduction: Rs 50,000 for salaried. 87A rebate: Rs 12,500 for income up to Rs 5L.
Surcharge Rates for AY 2025-26
Surcharge is an additional levy on the income tax computed (not on gross income). It applies only when total income exceeds Rs 50 lakh. Surcharge is computed before adding the 4% Health and Education Cess.
| Total Income | Surcharge Rate | Notes |
|---|---|---|
| Up to Rs 50 lakh | Nil | Same in both regimes |
| Rs 50L – Rs 1 crore | 10% | Same in both regimes |
| Rs 1 crore – Rs 2 crore | 15% | Same in both regimes |
| Rs 2 crore – Rs 5 crore | 25% | Same in both regimes |
| Above Rs 5 crore | 37% (old) / 25% (new) | New regime capped at 25% — eliminates 37% super-rich surcharge |
Marginal Relief: If your income exceeds a surcharge threshold by a small amount, marginal relief ensures that the additional tax payable on the excess income does not exceed the excess income itself. For example, if income is Rs 50,10,000 (just Rs 10,000 above Rs 50L), the 10% surcharge on tax would create a disproportionate burden — marginal relief limits the additional tax to Rs 10,000 in this case.
How to Compute Exact Income Tax — Step-by-Step Method
Income tax in India is computed in a specific sequence. Following this sequence precisely prevents errors in self-assessment and avoids mismatches with Form 26AS data.
Calculate Gross Total Income
Sum all income heads: Salary (after standard deduction of Rs 75K new / Rs 50K old), House Property, Capital Gains, Business/Profession, and Other Sources. Include all allowances received from employer. Gross Total Income is the starting point before Chapter VI-A deductions.
Apply Chapter VI-A Deductions (Old Regime Only)
Under the old regime, subtract all eligible deductions: 80C up to Rs 1.5L, 80CCD(1B) up to Rs 50K, 80D up to Rs 75K, 80E (uncapped interest), Section 24(b) up to Rs 2L, HRA exemption, LTA, and others. This gives your Net Taxable Income. Under new regime, skip this step (no Chapter VI-A deductions except 80CCD(2)).
Apply Tax Slabs to Net Taxable Income
Apply the slab rates progressively to your Net Taxable Income. Compute tax on each band separately and sum them. For Rs 12L under new regime: 0 on Rs 4L + 5% on Rs 4L (Rs 20,000) + 10% on Rs 4L (Rs 40,000) = Rs 60,000 total slab tax before rebate.
Apply Section 87A Rebate
If your Net Taxable Income is within the rebate threshold (Rs 12L new regime / Rs 5L old regime), apply the rebate to reduce tax to zero or lower. The rebate cannot exceed your actual slab tax. New regime: Rs 12L income tax = Rs 60,000 slab tax, exactly equal to Rs 60K rebate — result: Rs 0 tax before cess.
Add Surcharge (If Applicable)
If Net Taxable Income exceeds Rs 50 lakh, compute surcharge on the income tax (post-rebate). Apply the relevant rate: 10%, 15%, 25%, or 37% (old) based on income bracket. Under the new regime, maximum surcharge is 25%.
Add 4% Health and Education Cess
Compute cess at 4% on (income tax + surcharge). This is the final step in arriving at total tax liability. Cess applies to all taxpayers in both regimes without exception.
Deduct TDS Already Paid
Subtract TDS already deducted by your employer (visible in Form 16 and Form 26AS) and advance tax paid. The balance is the self-assessment tax payable with your ITR. If TDS exceeds the liability, the excess is your refund.
Worked Tax Examples — Rs 8L, Rs 12L, and Rs 20L (New Regime)
These examples use salaried income under the new regime for AY 2025-26. The standard deduction of Rs 75,000 is applied first. All figures include 4% cess.
Example 1
Rs 8 Lakh Salary
Salaried, New Regime
Example 2
Rs 12 Lakh Salary
Salaried, New Regime
Example 3
Rs 20 Lakh Salary
Salaried, New Regime
Old Regime Example — Rs 20 Lakh With Deductions
Assumption: Gross salary Rs 20,00,000 | Standard deduction Rs 50,000 | 80C Rs 1,50,000 | 80D Rs 50,000 | HRA exemption Rs 1,80,000 | 80CCD(1B) NPS Rs 50,000 | Section 24(b) home loan interest Rs 2,00,000
In this example, the new regime still wins marginally despite Rs 6.8L in old-regime deductions. This demonstrates that even heavy deduction users at Rs 20L income need to run the exact calculation — the new regime's lower slab rates can be competitive even against significant deduction pools.
Frequently Asked Questions
What are the income tax slabs for AY 2025-26 under the new regime?
New regime slabs for AY 2025-26: Nil up to Rs 4L; 5% on Rs 4–8L; 10% on Rs 8–12L; 15% on Rs 12–16L; 20% on Rs 16–20L; 25% on Rs 20–24L; 30% above Rs 24L. Enhanced 87A rebate of Rs 60,000 makes income up to Rs 12L effectively tax-free.
What are the income tax slabs for AY 2025-26 under the old regime?
Old regime slabs remain unchanged: Nil up to Rs 2.5L; 5% on Rs 2.5–5L; 20% on Rs 5–10L; 30% above Rs 10L. Senior citizens get Rs 3L nil threshold; super seniors (80+) get Rs 5L. The 87A rebate is Rs 12,500 for income up to Rs 5L.
Is income up to Rs 12 lakh really tax-free in the new regime?
Yes, effectively. Tax on Rs 12L under new slabs is exactly Rs 60,000 — equal to the 87A rebate. For salaried employees, the Rs 75,000 standard deduction keeps taxable income at Rs 11.25L for a Rs 12.75L gross salary, making zero tax applicable up to Rs 12.75L gross salary.
What is the Section 87A rebate for AY 2025-26?
New regime: rebate up to Rs 60,000 for total income up to Rs 12,00,000. Old regime: rebate up to Rs 12,500 for total income up to Rs 5,00,000. The rebate directly reduces income tax, not taxable income — it cannot exceed the actual tax payable.
What is the surcharge on income tax for high earners?
Surcharge rates: 10% on income between Rs 50L–1Cr; 15% on Rs 1–2Cr; 25% on Rs 2–5Cr; 37% above Rs 5Cr (old regime only — new regime caps surcharge at 25% regardless of income level). Surcharge is levied on income tax before adding 4% cess.
What is the health and education cess rate?
The Health and Education Cess is 4% of income tax (including surcharge). It applies to all taxpayers in both regimes. It replaced the 3% cess that was in place until FY 2017-18. The cess funds the Pradhan Mantri Swasthya Suraksha Yojana and education schemes.
Which income tax regime is the default for AY 2025-26?
The new tax regime is the default for all individual taxpayers. To use the old regime, file Form 10-IEA before July 31, 2025 (for AY 2025-26). Salaried employees must also declare their regime preference to their employer at the start of the year via Form 12BB.
Can senior citizens benefit from the new tax regime?
Yes. Senior citizens (60+) can use the new regime and benefit from the zero-tax threshold up to Rs 12L via the 87A rebate. However, if they have significant health insurance premiums (up to Rs 50K 80D) and fixed deposit interest (up to Rs 50K 80TTB), the old regime's deductions may produce better results — comparison depends on individual profile.
Compute your exact tax liability in seconds
Enter your salary, deductions, and regime preference — Oquilia's tax calculator runs the slab-by-slab computation and tells you the precise tax payable, cess, and whether switching regimes saves you money.