Income Tax Slabs FY 2025-26 cover the revised New Tax Regime rates, Existing old regime slabs, surcharge, cess, and key notes on interest income and TDS.
PART 2 – INCOME TAX SLABS AND RATES FOR 2025 -26
The Article on ” TAX PLANNING FOR FY 2025-26 CONTAINS 11 PARTS
PART I: MAJOR CHANGES IN TAX RULES FOR FY 2025-26
PART 2 : TAX SLABS /RATES FOR FY 2025-26
PART 3 : TAX REBATES FOR FY 25-26
PART 4 : CAPITAL GAIN TAX FOR FY 2025-26
PART 5 : TAX ON SALE OF RESIDENTIAL PROPERTY
PART 8 : INCOME TAX CALCULATOR FOR FY 2025-26
PART 9 : TAX ON RETIREMENT BENEFITS FOR FY 2025-26
PART 10 : HOW TO PAY INCOME TAX ONLINE?
PART 11 : TO KNOW ALL ABOUT TDS RATES ,
For the Financial Year 2025-26 (Assessment Year 2026-27), the Union Budget 2025 introduced significant revisions to the New Tax Regime to make it more attractive, while the Old Tax Regime remains unchanged.
Below are the detailed income tax slabs, rates, surcharge, and cess for both regimes.
TAX SLABS IN NEW REGIME FOR FY 2025-26
1. New Tax Regime (Default)
The New Tax Regime has been significantly revamped in Budget 2025. The tax-free limit (rebate) has been increased, and slabs have been widened.
| Income Slab (₹) | Tax Rate |
| Up to 4,00,000 | Nil |
| 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% |
Standard Deduction: Increased to ₹75,000 for salaried individuals and pensioners.
Tax Rebate (u/s 87A): Increased to ₹60,000. This means individuals with a taxable income up to ₹12,00,000 pay zero tax.Effective Zero Tax Limit: For salaried individuals, income up to ₹12,75,000 (₹12L + ₹75k deduction) results in zero tax liability.
2. Old Tax Regime (Optional)
The Old Tax Regime remains the same as previous years. It allows for various deductions like 80C, 80D, HRA, and home loan interest.
| Income Slab (₹) | Individuals (<60 yrs) | Senior Citizens (60–80 yrs) | Super Seniors (>80 yrs) |
| Up to 2,50,000 | Nil | Nil | Nil |
| 2,50,001 – 3,00,000 | 5% | Nil | Nil |
| 3,00,001 – 5,00,000 | 5% | 5% | Nil |
| 5,00,001 – 10,00,000 | 20% | 20% | 20% |
| Above 10,00,000 | 30% | 30% | 30% |
Standard Deduction: ₹50,000 for salaried individuals.
Tax Rebate (u/s 87A): Remains at ₹12,500 for taxable income up to ₹5,00,000.
3. Surcharge and Cess
Surcharge is an additional tax levied on high-income earners, calculated on the basic tax amount.
Surcharge Rates
| Total Income Range | New Regime Rate | Old Regime Rate |
| Above ₹50 Lakh – ₹1 Crore | 10% | 10% |
| Above ₹1 Crore – ₹2 Crore | 15% | 15% |
| Above ₹2 Crore – ₹5 Crore | 25% | 25% |
| Above ₹5 Crore | 25% (Capped) | 37% |
Note: The highest surcharge rate of 37% was abolished for the New Tax Regime in a previous budget and remains capped at 25% for FY 2025-26.
Health and Education Cess
A standard 4% Health and Education Cess is applicable on the sum of your Income Tax and Surcharge (if any) under both regimes
Key Comparison Summary
- New Regime: Better for those with limited investments, as it offers lower rates and a higher zero-tax threshold (up to ₹12.75L for salaried).
- Old Regime: Better for those who have high deductions (e.g., ₹1.5L in 80C, ₹50k in 80D, and ₹2L in Home Loan Interest).
TAX ON INTEREST INCOME :
In the New Tax Regime for FY 2025-26, the treatment of interest income and “exempt” securities is strictly governed by the rule that most deductions (like 80TTA/80TTB) are removed, but certain exemptions (under Section 10) remain.
Most interest income is taxable and must be added to your total income under “Income from Other Sources.” It is taxed according to your applicable income tax slab (5%, 10%, etc.).
- Savings Account Interest: Fully taxable in the New Regime. The deduction of ₹10,000 (Section 80TTA) is not available.
- Fixed Deposits (FD) & Recurring Deposits (RD): Fully taxable. The deduction of ₹50,000 for Senior Citizens (Section 80TTB) is not available.
- TDS Update (FY 2025-26): To reduce the burden on small savers, the threshold for TDS on FD interest has been increased:
- Regular Citizens: No TDS up to ₹50,000 (previously ₹40,000).
- Senior Citizens: No TDS up to ₹1,00,000 (previously ₹50,000).
- Note: This is only a TDS relief; you still owe tax if your total income exceeds the tax-free limit.
2. Exempted Securities & Interest in the New Regime
Even in the New Tax Regime, certain specific financial instruments remain tax-exempt under Section 10. These are not “deductions” but income that is never added to your taxable total:
| Security / Scheme | Tax Status in New Regime |
| Public Provident Fund (PPF) | Interest and maturity proceeds remain 100% Tax-Free. |
| Sukanya Samriddhi Yojana (SSY) | Interest and maturity proceeds remain 100% Tax-Free. |
| Post Office Savings Account | Interest is exempt up to ₹3,500 (Individual) or ₹7,000 (Joint) u/s 10(15)(i). |
| Tax-Free Bonds | Interest on specific government-notified tax-free bonds remains Exempt. |
| EPF Interest | Exempt as long as the employee’s contribution does not exceed ₹2.5 Lakh per year. |
| Life Insurance Maturity | Proceeds u/s 10(10D) are exempt (subject to premium-to-sum-assured limits). |
| Gold Monetization Scheme | Interest on deposit certificates is Exempt. |
If you have significant interest income from FDs or a Home Loan, the Old Regime might still be better for you because it allows you to subtract those amounts from your taxable income. However, if your total income is below ₹12.75 Lakh (including the ₹75k standard deduction), the New Regime usually results in zero tax regardless of these interest components.
THIS ARTICLE CARRIES INFORMATION ON VARIOUS TAX PROVISIONS WHICH ARE GENERALLY USEFUL .YET IT DOES NOT CARRY ALL THE PROVISIONS AND HENCE YOU ARE ADVISED TO GO THROUGH INCOME TAX DEPARTMENT WEBSITES FOR AUTHENTIC COMPLETE INFORMATION, ESPECIALLY FOR THOSE WHO HAVE GOT MULTIPLE STREAMS OF INCOME OR COMPLEX INVESTMENTS .YOU MAY ALSO CONSULT A QUALIFIED TAX CONSULTANT / CHARTERED ACCOUNTANT FOR ANY CLARIFICATION. READERS ARE ALSO WELCOME TO SEND FEEDBACK , FORM AVAILABLE BELOW. WE ARE OPEN FOR CORRECTION IF NEEDED .
This article is for informational purposes only. It summarises updates from publicly available sources and AI-generated insights. We have extensively used information gathered from a reputed AI app in preparing this article We are not SEBI-registered investment advisors, and this content does not constitute investment advice