Income Tax Slabs FY 2025-26 (AY 2026-27): New Tax Regime and Old Regime Rates, Senior Citizen Slabs, Worked Examples

Income tax slabs for FY 2025-26 (Assessment Year 2026-27) set the rate at which each rupee of your income is taxed. Under the new tax regime, income up to ₹12 lakh is effectively tax-free through the Section 87A rebate. For a salaried person, ₹12.75 lakh gross salary results in zero tax after the ₹75,000 standard deduction. This guide covers both regimes, worked examples at every income level, surcharge rates, senior citizen slabs, and a direct comparison of when each regime saves more.

What are Income Tax Slabs?

Income tax slabs are the income ranges defined by the Income Tax Act, each taxed at a different rate. India uses a progressive tax system: the first portion of income is tax-free, and higher portions attract higher rates. Only the income within each bracket is taxed at that bracket's rate, not your total income. There are two parallel slab systems for FY 2025-26: the new tax regime (default from FY 2023-24) and the old tax regime (optional, requires explicit selection at the time of filing).

New Tax Regime Slabs for FY 2025-26 (AY 2026-27)

The new tax regime for FY 2025-26 has seven slabs, revised in Union Budget 2025 to make income up to ₹12 lakh effectively tax-free. This is the default regime for all taxpayers; you must actively opt out if you prefer the old regime.

Key features of the new tax regime: standard deduction of ₹75,000 for salaried individuals, Section 87A rebate of up to ₹60,000 for taxable income up to ₹12 lakh, and no deductions under Chapter VI-A (80C, 80D, HRA, etc.). The maximum surcharge under the new regime is capped at 25%.

Old Tax Regime Slabs for FY 2025-26 (AY 2026-27)

The old tax regime has three slabs and remains unchanged from prior years. It is only beneficial if you can claim large deductions (HRA, 80C, 80D, NPS, etc.) that significantly reduce your taxable income.

Under the old regime, you can claim deductions including Section 80C (up to ₹1.5 lakh), Section 80D (health insurance), HRA exemption, NPS contribution (80CCD(1B), up to ₹50,000), standard deduction (₹50,000), home loan interest, and more. These reduce taxable income before applying slab rates.

Section 87A Rebate: Who Gets Zero Tax and How

Section 87A provides a direct rebate on your computed income tax, reducing it to zero if your taxable income is within the specified limit.

Important: the 87A rebate is an all-or-nothing threshold. If taxable income exceeds the limit by even ₹1, the rebate is lost entirely. At ₹12.01 lakh taxable income under the new regime, tax jumps from ₹0 to approximately ₹60,750 (before marginal relief). This is where marginal relief becomes critical.

Marginal Relief: How It Prevents Disproportionate Tax

Marginal relief under the new regime ensures that when taxable income crosses ₹12 lakh, the additional tax payable does not exceed the additional income earned beyond ₹12 lakh. This applies at three thresholds: the ₹12L rebate limit and the ₹50L/₹1Cr surcharge thresholds.

At around ₹12.75 lakh taxable income, the marginal relief and the normal tax calculation converge, and marginal relief no longer applies above that point.

Standard Deduction for FY 2025-26: New and Old Regime

The standard deduction is a flat deduction from gross salary before computing taxable income, available to all salaried employees and pensioners without any proof of expenditure.

The standard deduction under the new regime was increased from ₹50,000 to ₹75,000 in Budget 2024, and remains at ₹75,000 for FY 2025-26. This increase, combined with the revised slabs, is what makes ₹12.75 lakh salary completely tax-free.

How ₹12.75 Lakh Salary Becomes Tax-Free: Step-by-Step

The zero-tax outcome at ₹12.75 lakh works because of three things together: revised slabs, higher standard deduction, and the 87A rebate. Here is the exact working:

A gross salary of ₹12,75,001 means taxable income becomes ₹12,00,001, which exceeds the ₹12L rebate limit by ₹1. The full ₹60,000 rebate is lost. However, marginal relief applies: the tax payable is capped at ₹1 (the incremental income), not the full ₹60,750.

Surcharge and Health and Education Cess for FY 2025-26

Surcharge is an additional tax levied on income above ₹50 lakh. It is calculated on the base income tax (before cess). Health and Education Cess of 4% is then charged on the combined total of income tax plus surcharge.

The key difference: under the new regime, surcharge is capped at 25% for all income levels. Under the old regime, income above ₹5 crore attracts 37% surcharge, making the effective tax rate up to 42.74% (30% + 37% surcharge + 4% cess). This makes the new regime significantly better for very high earners.

Income Tax Slabs for Senior Citizens and Super Senior Citizens FY 2025-26

Senior citizen tax benefits apply only under the old tax regime. Under the new tax regime, the same slabs apply to all individuals regardless of age.

Senior Citizens (60 to 79 Years): Old Regime Only

Super Senior Citizens (80 Years and Above): Old Regime Only

Senior and super senior citizens are not required to pay advance tax (under Section 207) if they have no business income. They are also not required to file ITR if their total income is below the basic exemption limit.

Budget 2026: Are Tax Slabs Changing for FY 2026-27?

Union Budget 2026, presented on February 1, 2026, did not announce changes to the income tax slab structure. The new tax regime slabs introduced in Budget 2025 remain unchanged for FY 2026-27 (AY 2027-28): 0% up to ₹4 lakh, 5% on ₹4-8 lakh, 10% on ₹8-12 lakh, and the same structure through to 30% above ₹24 lakh. The Section 87A rebate limit of ₹12 lakh and the standard deduction of ₹75,000 also remain unchanged.

New Regime vs Old Regime: Which Saves More for You?

The new regime is better for most taxpayers, especially those with few deductions. The old regime is only advantageous when total eligible deductions are very high. Here is a framework:

The break-even deduction amount (where old regime becomes equal to new regime) depends on your income level. Approximate deduction amounts needed for the old regime to match the new regime:

Tax at Every Income Level: Old Regime vs New Regime Comparison

The table below shows tax under both regimes for common salary levels, with standard deduction applied and no additional deductions under old regime. Salaried employees with HRA or 80C claims will have lower old regime tax.

How to Calculate Income Tax for FY 2025-26: Step by Step

Calculating your income tax for FY 2025-26 follows eight steps. The process is the same for both regimes, with different numbers applied at each step.

1. Calculate Gross Total Income: Add all income: salary or business income, house property income, capital gains, and other sources.
2. Subtract Standard Deduction: Deduct ₹75,000 (new regime) or ₹50,000 (old regime) if you are salaried or a pensioner.
3. Apply Chapter VI-A Deductions (Old Regime Only): Under old regime, subtract 80C (up to ₹1.5L), 80D, HRA exemption, 80CCD(1B) NPS (₹50,000), 80TTA, and other applicable deductions.
4. Arrive at Taxable Income: Taxable Income = Gross Total Income minus all applicable deductions.
5. Apply Slab Rates Progressively: Apply each slab rate only to the income within that bracket. Sum up to arrive at total income tax before rebate.
6. Apply Section 87A Rebate: If taxable income is within the limit (₹12L new regime, ₹5L old regime), subtract the rebate to reduce tax to zero.
7. Add Surcharge if Income Exceeds ₹50 Lakh: If total income exceeds ₹50 lakh, compute surcharge on the base income tax at the applicable rate.
8. Add 4% Health and Education Cess: Multiply (income tax + surcharge) by 1.04 to get your final tax liability for the year.

Income Tax Calculation: Worked Examples for FY 2025-26

Example 1: Ms. Priya, ₹12.75 Lakh Salary (New Regime)

Example 2: Mr. Arjun, ₹25 Lakh Salary, Comparing Both Regimes

Even with ₹2.25 lakh in Chapter VI-A deductions, the new regime saves Mr. Arjun ₹1,80,700. He would need approximately ₹8 lakh in total deductions for the old regime to match the new regime at ₹25 lakh income.

How Tax Slabs Have Changed: FY 2023-24, FY 2024-25, and FY 2025-26

The new tax regime slabs have been revised in each budget to make lower and middle incomes progressively tax-free. The old tax regime slabs have not changed in over a decade.

Special Tax Rates for FY 2025-26: Capital Gains, Crypto, and Lottery

Some income types are taxed at special flat rates regardless of your income slab, under both the new and old tax regimes.

Income Tax Slabs for Women, NRIs, and HUFs in FY 2025-26

Women Taxpayers

Women below 60 years pay the same income tax slabs as male taxpayers for FY 2025-26. There are no separate, lower tax slabs for women. The differential treatment for women (which gave them a higher basic exemption) existed only until FY 2010-11 and was abolished in FY 2011-12.

Non-Resident Indians (NRIs)

• NRIs can only use the old tax regime; the new tax regime is not available to them.
• Under old regime: 0% up to ₹2.5 lakh, 5% on ₹2.5-5L, 20% on ₹5-10L, 30% above ₹10L.
• NRIs are not eligible for the Section 87A rebate under either regime.
• NRI income taxable in India includes: salary for services rendered in India, house property income in India, capital gains on assets in India.
• NRO account interest is fully taxable. Interest on NRE and FCNR accounts is tax-exempt for NRIs.
• TDS applies at source for most NRI income streams before the NRI receives funds.

Hindu Undivided Families (HUFs)

HUFs are taxed at the same slab rates as individual taxpayers (not at senior citizen or super senior citizen slabs). HUFs can choose between new and old tax regimes. Under the new regime, basic exemption is ₹4 lakh. Under old regime, basic exemption is ₹2.5 lakh. HUFs are eligible for the Section 87A rebate under both regimes (new: taxable ≤ ₹12L, old: taxable ≤ ₹5L).

Frequently Asked Questions: Income Tax Slabs FY 2025-26