The new tax regime for FY 2025-26 (AY 2026-27) continues to reshape how individuals pay income tax in India. With simpler tax slabs, higher exemptions, and fewer deductions, the revised structure is designed to increase disposable income and reduce compliance complexity.
In this guide we break down:
- New tax regime exemptions
- Latest tax slabs under the new regime
- Revised TDS rates
- Comparison with the old tax regime
- Who benefits the most in FY 2025-26
What Is the New Tax Regime?
The new tax regime, introduced under Section 115BAC, offers lower tax rates across more slabs but removes most deductions and exemptions available under the old tax regime.
From FY 2025-26 onwards:
- The new tax regime is the default option
- Taxpayers can still opt for the old tax regime if it is more beneficial
- Tax slabs are uniform for all age groups
New Tax Regime Slabs for FY 2025-26 (AY 2026-27)
Income Tax Slabs – New Regime
| Annual Income | 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% |
✅ These new tax regime slabs apply equally to:
- Individuals below 60
- Senior citizens
- Super senior citizens
New Tax Regime Exemption Limits Explained
One of the biggest advantages of the revised structure is the higher exemption threshold.
Key Exemptions Under the New Tax Regime
- Basic exemption limit: ₹4 lakh
- Section 87A rebate: Up to ₹60,000
- Tax-free income limit:
- ₹12 lakh (non-salaried)
- ₹12.75 lakh (salaried, after standard deduction)
- ₹12 lakh (non-salaried)
📌 Result: If your taxable income does not exceed ₹12 lakh, your final tax payable is zero.
Also Read: Taxes on Investments in India and the US
Standard Deduction in the New Tax Regime
For FY 2025-26:
- Standard deduction: ₹75,000
- Applicable to salaried individuals and pensioners
- Available only in the new tax regime
This pushes the effective zero-tax salary limit to ₹12.75 lakh.
Revised TDS Rates – What Has Changed?
The revised TDS rates under the Income Tax Act, 2025 aim to reduce friction and improve cash flow.
Key TDS Updates:
- Rationalisation of multiple TDS slabs
- Simplified compliance timelines
- Alignment with new tax regime slabs
- Faster credit and adjustment against final tax liability
These changes are especially helpful for salaried employees, freelancers, and investors.
Old Tax Regime vs New Tax Regime – Which Is Better?
Old Tax Regime (Summary)
- Higher tax rates
- Multiple deductions (80C, HRA, LTA, home loan interest)
- Different slabs for senior citizens
Also Read: Difference Between Old and New Tax Regime
New Tax Regime (Summary)
- Lower tax rates
- Minimal deductions
- Higher exemption & rebate
- Simpler filing
Quick Comparison
| Factor | Old Tax Regime | New Tax Regime |
| Deductions | Available | Mostly not allowed |
| Tax slabs | Fewer | More & smoother |
| Compliance | Complex | Simple |
| Default option | No | Yes |
👉 If you claim limited deductions, the new tax regime is usually more beneficial.
Who Should Choose the New Tax Regime?
The new tax regime slabs are ideal if you:
- Earn between ₹8 lakh and ₹24 lakh
- Don’t heavily invest in tax-saving instruments
- Prefer higher monthly take-home salary
- Want simpler tax compliance
Marginal Relief Under the New Tax Regime
Marginal relief ensures that:
- Tax payable does not exceed income exceeding ₹12 lakh
- Prevents sudden tax jumps for slightly higher income
This is especially useful for taxpayers earning just above ₹12 lakh.
Impact of New Tax Regime on Middle-Income Taxpayers
With smoother slabs and higher exemption:
- Income between ₹12–24 lakh sees lower effective tax
- Middle-income households benefit the most
- Encourages spending, saving, and investing
Final Takeaway – Choose What Works for You
The new tax regime for FY 2025-26 is clearly designed for simplicity, transparency, and higher take-home income. However, the old tax regime may still work better for taxpayers with substantial deductions.
FAQs – New Tax Regime
Under the new tax regime, income up to ₹12 lakh is tax-free due to the Section 87A rebate. For salaried individuals, the limit increases to ₹12.75 lakh after standard deduction.
The new tax regime slabs range from 0% up to ₹4 lakh to 30% above ₹24 lakh, with gradual slab increases in between.
Yes. If you do not have business income, you can choose between the old tax regime and new tax regime every year while filing your ITR.
No. The new tax regime slabs are the same for all age groups, unlike the old tax regime.
No. Popular deductions like 80C, HRA, and LTA are not allowed under the new tax regime.
TDS is deducted as per applicable provisions, but final tax liability depends on the regime chosen at the time of filing.
Disclaimer: Investments in securities markets are subject to market risks. Read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory.
