Income Tax Slabs FY 2025-26 — Old vs New Regime Complete Breakdown
The Union Budget 2025 made income up to ₹12 lakh effectively tax-free under the new regime. But the old regime still benefits those with deductions exceeding ₹3.75 lakh. Here is the complete slab-by-slab breakdown with worked examples at four income levels.
India's income tax system now offers two parallel tax structures — the old regime with numerous deductions and exemptions, and the new regime with lower slab rates but almost no deductions. The Union Budget 2025 significantly revised the new regime slabs and increased the Section 87A rebate, making income up to ₹12 lakh effectively tax-free. This guide provides a complete slab-by-slab breakdown of both regimes with worked examples at ₹8 lakh, ₹12 lakh, ₹20 lakh, and ₹50 lakh income levels.
Understanding these slabs is essential for choosing the right regime and planning your investments. For a deeper comparison beyond just slabs, our old vs new tax regime guide covers deduction strategies and worked examples at every salary level. Use the Tax Regime Comparator below to compute your exact tax under both regimes, then read the detailed breakdowns and decision framework.
Tax Regime Calculator
Data Sources
- Finance Act 2025 — Income Tax Slab Revisions (FY 2025-26) — incometaxindia.gov.in
- Income Tax Act, 1961 — Sections 115BAC, 87A (As amended 2025) — incometaxindia.gov.in
- CBDT Notifications — Standard Deduction & Surcharge Rules (2025) — incometaxindia.gov.in
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New Regime Tax Slabs — FY 2025-26 (Section 115BAC)
The new regime slabs were revised in the Union Budget 2025, with broader slab widths and a higher Section 87A rebate. These are the rates applicable for income earned between April 2025 and March 2026 (Assessment Year 2026-27):
| Taxable Income Slab | Tax Rate | Tax on This Slab |
|---|---|---|
| Up to ₹4,00,000 | Nil | ₹0 |
| ₹4,00,001 – ₹8,00,000 | 5% | ₹20,000 |
| ₹8,00,001 – ₹12,00,000 | 10% | ₹40,000 |
| ₹12,00,001 – ₹16,00,000 | 15% | ₹60,000 |
| ₹16,00,001 – ₹20,00,000 | 20% | ₹80,000 |
| ₹20,00,001 – ₹24,00,000 | 25% | ₹1,00,000 |
| Above ₹24,00,000 | 30% | Varies |
Standard deduction: ₹75,000 is available for salaried individuals and pensioners. This means a gross salary of up to ₹12,75,000 results in a taxable income of ₹12,00,000, which is fully covered by the Section 87A rebate.
Section 87A rebate: If your total taxable income under the new regime does not exceed ₹12 lakh, you receive a rebate of up to ₹60,000, making the tax payable zero. This rebate is the reason income up to ₹12 lakh (₹12.75L gross salary) is effectively tax-free. The moment taxable income crosses ₹12,00,000, the entire rebate is lost.
Old Regime Tax Slabs — FY 2025-26
The old regime slab rates have remained unchanged for several years. The key advantage of the old regime is access to all deductions (80C, 80D, HRA, home loan interest, etc.). See the full old vs new tax regime comparison for a side-by-side deduction table:
| Taxable Income Slab | Tax Rate | Tax on This Slab |
|---|---|---|
| Up to ₹2,50,000 | Nil | ₹0 |
| ₹2,50,001 – ₹5,00,000 | 5% | ₹12,500 |
| ₹5,00,001 – ₹10,00,000 | 20% | ₹1,00,000 |
| Above ₹10,00,000 | 30% | Varies |
Standard deduction: ₹50,000 for salaried individuals (lower than the ₹75,000 available under the new regime).
Section 87A rebate (Old): If total taxable income under the old regime does not exceed ₹5 lakh, a rebate of up to ₹12,500 is available, making income up to ₹5 lakh tax-free. This threshold is much lower than the new regime's ₹12 lakh.
Worked Examples at 4 Income Levels
Example 1: Gross Salary ₹8 Lakh
| Calculation Step | New Regime | Old Regime (₹2L deductions) |
|---|---|---|
| Gross Salary | ₹8,00,000 | ₹8,00,000 |
| Standard Deduction | −₹75,000 | −₹50,000 |
| 80C (PPF, EPF, ELSS) | N/A | −₹1,50,000 |
| 80D (Health Insurance) | N/A | −₹25,000 |
| Taxable Income | ₹7,25,000 | ₹5,75,000 |
| Tax Before Rebate | ₹16,250 | ₹27,500 |
| Section 87A Rebate | −₹16,250 (below ₹12L) | Not eligible (above ₹5L) |
| Tax After Rebate | ₹0 | ₹27,500 |
| Cess (4%) | ₹0 | ₹1,100 |
| Total Tax | ₹0 | ₹28,600 |
At ₹8 lakh salary, the new regime wins decisively. Even with ₹2 lakh in deductions under the old regime, you pay ₹28,600 vs zero under the new regime. The Section 87A rebate in the new regime eliminates all tax below ₹12 lakh.
Example 2: Gross Salary ₹12 Lakh
| Calculation Step | New Regime | Old Regime (₹3.5L deductions) |
|---|---|---|
| Gross Salary | ₹12,00,000 | ₹12,00,000 |
| Standard Deduction | −₹75,000 | −₹50,000 |
| 80C | N/A | −₹1,50,000 |
| 80D | N/A | −₹50,000 |
| 80CCD(1B) NPS | N/A | −₹50,000 |
| HRA Exemption | N/A | −₹1,00,000 |
| Taxable Income | ₹11,25,000 | ₹8,00,000 |
| Tax Before Rebate | ₹52,500 | ₹72,500 |
| Section 87A Rebate | −₹52,500 (below ₹12L) | Not eligible |
| Tax After Rebate | ₹0 | ₹72,500 |
| Cess (4%) | ₹0 | ₹2,900 |
| Total Tax | ₹0 | ₹75,400 |
At ₹12 lakh, the new regime again results in zero tax. Even with ₹3.5 lakh in deductions under the old regime, the old regime tax is ₹75,400. The new regime saves ₹75,400 in this scenario. The old regime would need to bring taxable income below ₹5 lakh to compete — requiring ₹6.5 lakh in deductions, which is impractical for most people.
Example 3: Gross Salary ₹20 Lakh
| Calculation Step | New Regime | Old Regime (₹5L deductions) |
|---|---|---|
| Gross Salary | ₹20,00,000 | ₹20,00,000 |
| Standard Deduction | −₹75,000 | −₹50,000 |
| 80C | N/A | −₹1,50,000 |
| 80D | N/A | −₹50,000 |
| 80CCD(1B) NPS | N/A | −₹50,000 |
| HRA Exemption | N/A | −₹2,00,000 |
| Home Loan Interest (Sec 24) | N/A | −₹2,00,000 |
| Taxable Income | ₹19,25,000 | ₹13,00,000 |
| Slab-wise Tax | ||
| 0–4L / 0–2.5L | ₹0 | ₹0 |
| 4–8L / 2.5–5L | ₹20,000 | ₹12,500 |
| 8–12L / 5–10L | ₹40,000 | ₹1,00,000 |
| 12–16L / 10L+ | ₹60,000 | ₹90,000 (30% on 3L) |
| 16–19.25L | ₹65,000 (20% on 3.25L) | — |
| Tax Before Cess | ₹1,85,000 | ₹2,02,500 |
| Cess (4%) | ₹7,400 | ₹8,100 |
| Total Tax | ₹1,92,400 | ₹2,10,600 |
At ₹20 lakh with ₹5 lakh in deductions (including home loan and HRA), the new regime still saves ₹18,200. However, if the old regime deductions reach ₹5.75 lakh or more, the old regime becomes cheaper. This is realistic for someone with a home loan (₹2L interest) plus HRA (₹2L) plus 80C (₹1.5L) plus 80D (₹50K) — totalling ₹6 lakh. The decision at this income level is genuinely close and depends on individual deductions.
Example 4: Gross Salary ₹50 Lakh
| Calculation Step | New Regime | Old Regime (₹6L deductions) |
|---|---|---|
| Gross Salary | ₹50,00,000 | ₹50,00,000 |
| Standard Deduction | −₹75,000 | −₹50,000 |
| Total Deductions (80C, 80D, HRA, Sec 24) | N/A | −₹6,00,000 |
| Taxable Income | ₹49,25,000 | ₹43,50,000 |
| Tax on Slabs (New) | ₹9,57,500 | — |
| Tax on Slabs (Old) | — | ₹11,17,500 |
| Cess (4%) | ₹38,300 | ₹44,700 |
| Total Tax (no surcharge) | ₹9,95,800 | ₹11,62,200 |
At ₹50 lakh, the new regime saves ₹1.66 lakh even though the old regime has ₹6 lakh in deductions. Note: at ₹50 lakh, neither regime triggers surcharge (surcharge kicks in above ₹50 lakh taxable income). For income slightly above ₹50 lakh, a 10% surcharge applies, further widening the gap in favour of the new regime (which caps surcharge at 25%).
Surcharge Rules — Old vs New Regime
How does surcharge differ between old and new regime?
Surcharge is levied on the income tax amount (not the income) when total income exceeds certain thresholds. The surcharge rates differ significantly between the two regimes at higher income levels. Surcharge also applies to capital gains on property sales — see our capital gains property guide for details on how the 12.5% vs 20% rate interacts with surcharge:
| Total Income | Old Regime Surcharge | New Regime Surcharge |
|---|---|---|
| Up to ₹50 lakh | Nil | Nil |
| ₹50L – ₹1 crore | 10% | 10% |
| ₹1Cr – ₹2 crore | 15% | 15% |
| ₹2Cr – ₹5 crore | 25% | 25% (capped) |
| Above ₹5 crore | 37% | 25% (capped) |
The new regime caps surcharge at 25%, while the old regime allows up to 37% for income above ₹5 crore. This makes the new regime significantly more favourable for ultra-high-net-worth individuals. The maximum marginal tax rate is 39% under the new regime vs 42.74% under the old regime.
Marginal relief: Surcharge is subject to marginal relief, meaning the surcharge cannot exceed the amount of income exceeding the threshold. For example, if your income is ₹50,10,000, the 10% surcharge on your tax should not exceed ₹10,000 (the income above ₹50 lakh). This prevents a situation where earning ₹1 more pushes you into a dramatically higher tax bracket.
Health & Education Cess
A 4% Health and Education Cess is levied on the total of (income tax + surcharge). This cess applies equally under both regimes and to all income levels. The cess is calculated as: (Tax + Surcharge) × 4%. For someone paying ₹5 lakh in tax with no surcharge, the cess adds ₹20,000. For someone paying ₹10 lakh in tax with a 10% surcharge (₹1 lakh), the cess is 4% of ₹11 lakh = ₹44,000.
Deductions Available Under Each Regime
Which deductions can you claim in old vs new regime?
| Deduction | Old Regime | New Regime |
|---|---|---|
| Standard Deduction | ₹50,000 | ₹75,000 |
| 80C (PPF, ELSS, EPF, LIC) | Up to ₹1.5L | Not available |
| 80D (Health Insurance) | Up to ₹75K | Not available |
| 80CCD(1B) (Self NPS) | Up to ₹50K | Not available |
| 80CCD(2) (Employer NPS) | 10%/14% of salary | 10%/14% of salary |
| HRA Exemption (Sec 10(13A)) | Available | Not available |
| LTA Exemption | Available | Not available |
| Home Loan Interest (Sec 24) | Up to ₹2L | Not available |
| Home Loan Principal (80C) | Within 80C limit | Not available |
| 80E (Education Loan Interest) | Full amount | Not available |
| 80G (Donations) | 50%/100% | Not available |
| 80TTA (Savings Interest) | Up to ₹10K | Not available |
The only deductions available in both regimes are: standard deduction (₹75K new vs ₹50K old) and employer NPS contribution under 80CCD(2). Every other deduction requires the old regime. If you pay rent, use our HRA exemption guide to compute your exact HRA savings, and our EPF Calculator to see how much of your 80C limit is already consumed by provident fund contributions. The decision framework hinges entirely on the total deduction amount under the old regime.
Break-Even Analysis: When Does Old Regime Win?
How much in deductions do you need for old regime to save more?
The critical question is: at what deduction level does the old regime save more tax than the new regime? Here is the approximate break-even for different income levels:
| Gross Salary | Break-Even Deductions (Old Regime) | Recommendation |
|---|---|---|
| Up to ₹12.75L | Not possible (new = ₹0 tax) | Always New Regime |
| ₹15 lakh | ~₹3.75 lakh | New unless home loan + HRA |
| ₹20 lakh | ~₹3.75–4.25 lakh | Close call; compute both |
| ₹25 lakh | ~₹4.5–5 lakh | Old if HRA + home loan + NPS |
| ₹30 lakh | ~₹5–5.5 lakh | Old only with max deductions |
| ₹50 lakh+ | ~₹6–7 lakh | New usually wins; compute |
The break-even deduction threshold is approximately ₹3.75 lakh for most income levels. This means if your total deductions under the old regime (80C + 80D + HRA + home loan interest + NPS + LTA) exceed ₹3.75 lakh, the old regime likely saves more. Below ₹3.75 lakh in deductions, the new regime is almost always better.
Decision Framework: Choose New If vs Choose Old If
| Choose New Regime If | Choose Old Regime If |
|---|---|
| Income below ₹12.75L (gross) | You have a home loan (₹2L interest deduction) |
| Total deductions below ₹3.75L | You pay high rent in a metro (HRA ₹1–3L) |
| You don't have a home loan | Total deductions exceed ₹3.75–4L |
| You live in your own house (no HRA) | You invest in NPS (extra ₹50K under 80CCD(1B)) |
| You prefer simplicity (no tracking) | You have parents' health insurance (extra ₹50K 80D) |
| Income above ₹50L (surcharge cap benefit) | You have education loan interest (80E) |
Marginal Relief for Income Slightly Above ₹12 Lakh
What happens if your income is just above the ₹12 lakh threshold?
A common concern is the cliff effect at the ₹12 lakh threshold. If your taxable income is ₹12,10,000, you lose the entire ₹60,000 Section 87A rebate. Without marginal relief, you would owe ₹61,500 in tax on ₹12,10,000 — meaning you earned ₹10,000 extra but paid ₹61,500 in tax. That makes no sense.
Marginal relief ensures that the tax payable on income just above ₹12 lakh does not exceed the amount by which the income exceeds ₹12 lakh. So for income of ₹12,10,000, the maximum tax is ₹10,000 (not ₹61,500). This smooths the transition and prevents perverse outcomes where earning more results in lower take-home pay.
The marginal relief zone effectively extends from ₹12 lakh to approximately ₹12.7 lakh, beyond which the normal slab calculation takes over. If your taxable income falls in this zone, the effective tax rate is approximately 100% on the incremental income (every additional rupee is fully taxed) until the normal slab calculation produces a lower amount.
Related Calculators & Guides
- Tax Regime Comparator — Compute your exact tax under both regimes with all deductions
- HRA Exemption Calculator — Calculate your maximum HRA exemption under the old regime
- Old vs New Tax Regime Guide — Detailed comparison with deduction analysis
- NPS Calculator — Calculate retirement corpus and 80CCD(1B) tax savings
NISM XIX-C certified · Partner, Tykhe Ventures (SEBI AIF Cat II) · Founder, RupayWise
Ganesh Kompella is NISM Series XIX-C certified — the certification for Alternative Investment Fund managers — and a Partner at Tykhe Ventures, a SEBI-registered Category II AIF (~$20 M AUM). He's a self-taught engineer who built RupayWise and its 230+-test calculation engine because India's finance tools were built to sell products, not to help you decide. RupayWise is an educational platform — not a SEBI-registered Investment Adviser.
Important: This guide is for informational and educational purposes only. While we strive for accuracy, tax laws, interest rates, and financial regulations change frequently. Always verify current rates and rules with official government sources before making decisions.
Frequently Asked Questions
Can I switch between old and new tax regime every year?
Yes, salaried employees can switch between the old and new tax regime every financial year at the time of filing their income tax return. There is no lock-in. You can choose old regime for FY 2024-25 and new regime for FY 2025-26, and switch back again the following year. However, if you have business or professional income (ITR-3 or ITR-4), you can switch out of the old regime only once in your lifetime. Once you switch to the new regime from a business income, you cannot go back to the old regime.
Which tax regime is the default for FY 2025-26?
The new tax regime is the default regime from FY 2023-24 onwards. If you do not explicitly opt for the old regime, the new regime will be applied automatically. For salaried employees, you should inform your employer at the beginning of the year which regime you want for TDS purposes. If you don’t, TDS will be deducted as per the new regime. You can still switch to the old regime at the time of filing your ITR, and claim a refund of excess TDS if applicable.
How does Section 87A rebate work under the new regime?
Under the new regime for FY 2025-26, Section 87A provides a tax rebate of up to ₹60,000 for individuals whose total taxable income (after the ₹75,000 standard deduction) is up to ₹12 lakh. This effectively makes income up to ₹12 lakh tax-free. The rebate amount equals the tax liability or ₹60,000, whichever is lower. If your taxable income is ₹12,00,001 or more, the entire rebate is lost and you pay tax on the full amount. Marginal relief provisions exist to ensure you don’t pay more tax than the income exceeding ₹12 lakh.
How do I switch from new to old regime if I am salaried?
For salaried employees, switching between regimes is done at two stages: (1) At the start of the year, inform your employer via a declaration form so they deduct TDS per the correct regime. Most companies send this form in April. (2) At the time of filing ITR, you make the final choice. Even if your employer deducted TDS under the new regime, you can choose the old regime in your ITR and claim a refund of excess tax. No Form 10-IE or special application is needed for salaried employees — just select the regime in your ITR.
What deductions are available under the new tax regime?
The new tax regime allows very few deductions: (1) Standard deduction of ₹75,000 for salaried individuals, (2) Employer NPS contribution under Section 80CCD(2) — up to 10% of basic + DA for private sector and 14% for government employees, (3) Agniveer Corpus Fund deduction under Section 80CCH. All other major deductions are NOT available: 80C (PPF, ELSS, EPF, insurance), 80D (health insurance), 80CCD(1B) (self NPS), HRA, LTA, home loan interest (Section 24), and others.
Is the new regime better for income above ₹20 lakh?
Not necessarily. For income above ₹20 lakh, the old regime can still save more tax if your total deductions are substantial (typically ₹4-5 lakh or more). At ₹20 lakh income, the breakeven deduction level is approximately ₹3.75 lakh — if your 80C + 80D + HRA + home loan interest exceeds this, the old regime saves more. Many high-income individuals with home loans (Section 24 deduction of up to ₹2 lakh) plus HRA (₹1-3 lakh) plus 80C (₹1.5 lakh) easily cross ₹5 lakh in deductions, making the old regime favourable.
Do NRIs have to follow the same tax slabs?
NRIs are taxed on their India-sourced income at the same slab rates as resident Indians. They can choose between the old and new tax regimes. However, NRIs are not eligible for the Section 87A rebate under either regime. This means an NRI with ₹7 lakh income under the old regime would pay ₹52,500 in tax, while a resident Indian would pay zero (due to rebate). NRIs also face higher TDS rates on certain incomes (interest, rent, capital gains). DTAA provisions may reduce the effective tax burden depending on the country of residence.
How does surcharge work on income above ₹50 lakh?
Surcharge is an additional tax on the income tax amount (not on the income itself). For FY 2025-26: 10% surcharge on income above ₹50 lakh, 15% above ₹1 crore, 25% above ₹2 crore (old regime only, new regime caps at 25%), and 37% above ₹5 crore (old regime only). Under the new regime, surcharge is capped at 25% regardless of income. This makes the maximum effective rate 39% under the new regime vs 42.74% under the old regime for ultra-high incomes. Marginal relief ensures that surcharge does not exceed the additional income beyond the threshold.
What is the maximum tax rate in India including surcharge and cess?
Under the old regime, the maximum effective tax rate is 42.744% — this applies to income above ₹5 crore (30% base rate + 37% surcharge + 4% cess). Under the new regime, the maximum effective rate is 39% (30% base rate + 25% surcharge cap + 4% cess). For most individuals earning between ₹15-50 lakh, the effective rate is 25-34% depending on deductions and regime choice. The 4% Health and Education Cess is levied on (tax + surcharge), making it compound in nature.
Can I claim home loan interest deduction under the new regime?
No. Home loan interest deduction under Section 24(b) — which allows up to ₹2 lakh deduction on a self-occupied property — is not available under the new tax regime. This is one of the largest deductions that pushes homeowners toward the old regime. For someone in the 30% bracket, ₹2 lakh of home loan interest deduction saves ₹62,400 in tax. If you have a home loan, always compute your tax under both regimes before choosing. The principal repayment under Section 80C (up to ₹1.5 lakh) is also unavailable under the new regime.
Related Resources
Guides
- Tax Regime Guide — Complete comparison of Old vs New tax regime for FY 2025-26 with deduction analysis and calculator.
Comparisons
- Old vs New Regime — Side-by-side tax regime comparison with slab tables, deduction matrix, and decision tree.
Disclaimer: This guide is for informational and educational purposes only. Tax slab rates and rebate rules are based on the Finance Act 2025 and may change with subsequent budgets or CBDT notifications. The worked examples use simplified calculations and may not account for all possible deductions, exemptions, or special provisions. This does not constitute financial or tax advice. Consult a qualified chartered accountant or tax professional for personalised tax planning. RupayWise is not a SEBI-registered financial advisor.