Overview of FY 2025-26 Tax Landscape
Financial Year 2025-26 (Assessment Year 2026-27) brings enhanced relief under the new tax regime, now default for individuals/HUFs without business income. Basic exemption rises to INR 4 lakh (from INR 3 lakh), with rebate u/s 87A up to INR 60,000—making salary up to INR 12.75 lakh tax-free after INR 75,000 standard deduction.
Old regime retains deductions but higher effective rates kick in earlier. Surcharge capped at 25% (>INR 2 crore income). Key additions: EV loan interest deduction INR 1.5 lakh u/s 80EEB extension.
These changes, post-Budget 2025, prioritize salaried/middle-class relief amid economic recovery.
New Tax Regime Slabs (Default Option)
Simplified structure with limited deductions (std ded INR 75K, NPS employer 14%). Zero tax up to INR 12.75L effectively.
| Income Range (INR) | Tax Rate | Cumulative Tax (INR) |
| 0 – 4L | Nil | 0 |
| 4L – 8L | 5% | 20,000 |
| 8L – 12L | 10% | 60,000 |
| 12L – 16L | 15% | 1,20,000 |
| 16L – 20L | 20% | 2,00,000 |
| 20L – 24L | 25% | 2,80,000 |
| Above 24L | 30% | +30% on excess |
Rebate u/s 87A: Full tax rebate up to INR 60,000 if income ≤ INR 12L (new regime). With std ded, ~INR 12.75L tax-free. No surcharge applicability.
Old Tax Regime Slabs: Deduction-Heavy
Offers exemptions but complex calculations.
| Category | Income Range (INR) | Rate |
| Individuals <60 | 0-2.5L: Nil; 2.5-5L: 5%; 5-10L: 20%; >10L: 30% | |
| Seniors 60-80 | 0-3L: Nil; then as above | |
| Super Seniors >80 | 0-5L: Nil; then as above | |
Rebate u/s 87A: INR 12,500 if income ≤ INR 5L (old regime).
Key Changes and Updates for FY 2025-26
- Basic Exemption Hike: New regime INR 4L; old unchanged.
- Rebate Boost: INR 60K new (from 25K); salaried zero tax to 12.75L.
- Surcharge Cap: 25% max (>INR 2Cr); marginal relief clarified—no incremental tax > incremental income.
- Health Insurance (80D): INR 50K limit (self/parents); INR 25K preventive checkups. Doubled for seniors.
- EV Loan Interest: INR 1.5L u/s 80EEB extended to March 2027.
- Agniveer Fund: 100% deduction u/s 80C(2)(iuc). New for defense personnel.
- SGB Redemption: Tax-free sustained.
Health & Education Cess: 4% uniform.
Deductions Available Only in Old Regime: Detailed Breakdown
Old regime shines for investors/savers. Aggregate limits apply.
Section 80C (INR 1.5L Max)
- PPF, EPF, NPS Tier-1
- ELSS mutual funds (3-yr lock)
- Tuition fees (up to 2 children)
- Home loan principal, stamp duty
- Sukanya Samriddhi, senior citizen deposit
Section 80D (Health Insurance)
| Payee | Limit (INR) |
| Self/family | 25,000 |
| Parents (<60) | 25,000 |
| Parents (60+) | 50,000 |
| Preventive checkup | 5,000 (within above) |
Housing-Related Deductions
- HRA Exemption: Least of (actual HRA, rent-10% salary, 50%/40% metro rent)
- 80EEA Home Loan Stamp Duty: INR 1.5L interest (affordable housing)
- 24(b) Let-Out/Self-Occupied: INR 2L interest self-occ; no limit let-out (loss set-off 2 yrs)
Other Key Deductions
- 80G Donations: 50-100% (cash cap INR 2,000)
- 80TTA/TTB Savings Interest: INR 10K savings; INR 50K seniors/deposits
- 80GGC Political Contributions: 100% (non-cash)
Rebate and Cess Details: Mathematical Insights
87A Calculation Example (New Regime, INR 11L income):
Tax before rebate: INR 55,000 → Full rebate → Net: 0 (after std ded).
Cess: 4% on tax + surcharge. Surcharge slabs:
- 10%: 50L-1Cr
- 15%: 1-2Cr
- 25%: 2-5Cr
- 37%: >5Cr (cap 25%? Clarified marginal)
Marginal Relief: Ensures tax on INR 2.01Cr < tax on INR 2Cr.
Salaried Taxpayers: Which Regime Benefits You? Examples & Calculators
Example 1: Salaried INR 10L, No Deductions
- New: Tax INR 40K – rebate 40K = 0
- Old: INR 95K + cess
Example 2: INR 15L + 80C INR 1.5L + HRA INR 2L
- New: INR 1.65L tax
- Old: INR 1.2L (better)
Use e-filing calculators; switch annually (non-business). Business income: New regime lock-in.
Comparison Table (INR 12L Salary):
| Factor | New Regime | Old Regime |
| Tax-Free Limit | 12.75L | 5-7L |
| Deductions | Minimal | Full 80C/D |
| Complexity | Low | High |
Advance Tax and TDS Implications: Quarterly Compliance
Advance tax mandatory if liability > INR 10K (after TDS). Installments: 15% Jun15, 45% Sep15, 75% Dec15, 100% Mar15.
Penalty u/s 234B/C: 1% simple/month short payment. Salaried: Employer TDS credits auto-adjust.
TDS Rates Snapshot (Key for Businesses):
- Salary: As per slabs
- Professional: 10%
- Rent: 10% >2.4L/annum
Late TDS interest: 1.5%/month deduction to deposit.
Special Provisions for Senior Citizens
- Additional Deduction: INR 50K old regime (65+); super seniors higher thresholds.
- No Advance Tax: >75yrs, pension-only (Form 15H).
- 80TTB: INR 50K bank interest seniors.
Impact on Different Income Groups
- Low-Income (<12L): New regime zero tax.
- Middle (12-24L): Compare deductions.
- High (>50L): Surcharge planning.
Planning Tips for FY 2025-26
- Maximize NPS/EPF early.
- Track HRA/rent proofs.
- Use calculators pre-March 31 opt-out.
- Seniors: 15H for TDS relief.
Monitor CBDT circulars; file by Jul 31, 2026. These slabs promote savings while simplifying compliance.
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