Introduction
The Indian government updates
income tax slabs every year to ensure fairness in taxation. For FY 2025-26,
the tax slabs have changed, impacting salaried employees, self-employed
individuals, and businesses. In this guide, we will explain the new tax
slabs in simple terms and discuss how they affect different taxpayers.
What Are Income Tax Slabs?
Income tax in India is not a
fixed amount; it depends on how much money you earn. The government sets
different tax slabs (income ranges), where the tax rate increases as
your income rises.
For example:
- If you earn ₹4 lakh per year, you may not
need to pay tax.
- If you earn ₹14 lakh per year, you will pay
a certain percentage based on the slab you fall into.
- If you earn ₹24 lakh per year, you will pay
a higher tax percentage.
This system ensures that people
with higher incomes pay more tax than those with lower incomes.
Old vs. New Tax Regime – What’s the Difference?
Currently, taxpayers can choose
between two types of tax structures:
1. Old Tax Regime
✅ Allows you to claim tax
deductions and exemptions (like HRA, 80C, 80D).
✅
Useful for people who invest in tax-saving schemes.
❌
Higher tax rates.
2. New Tax Regime (Revised in 2025-26)
✅ Lower tax rates.
✅
Simpler structure (no need to claim deductions).
❌
No deductions for HRA, insurance, home loan interest, etc.
Example: If you are a
salaried person and claim deductions like PPF, LIC, home loan, the old
regime may be better. But if you don’t claim many deductions, the new
regime is simpler and has lower rates.
New Income Tax Slabs for FY 2025-26 (New Regime)
|
Income Slab (₹) |
Tax Rate (%) |
|
0 - 4,00,000 |
0% (No
Tax) |
|
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% |
💡 Key Changes:
- The tax-free limit is now ₹4 lakh
instead of ₹3 lakh.
- Standard deduction increased from ₹50,000 to
₹75,000.
- People earning ₹12 lakh or less get extra benefits.
How Does This Impact Individuals?
1. Salaried Employees
- If you earn below ₹12 lakh, you might pay
less tax under the new regime.
- If you claim many deductions (HRA, 80C, home loan),
the old regime may still be better.
2. Self-Employed & Freelancers
- If you don’t claim deductions, the new regime is
better because it has lower tax rates.
- If you invest in PPF, LIC, home loan, the old
regime might help save tax.
3. Senior Citizens (60+ years)
- No tax up to ₹4 lakh (Old Regime).
- Under the new regime, income up to ₹12 lakh is
tax-free due to rebates
How Does This Impact Businesses?
Corporate Tax Rates Stay the Same:
- Small Companies: 25% (if turnover < ₹400
crore).
- Large Companies: 30%.
- New Manufacturing Companies: 15% (under
Section 115BAB).
Startups & Small Businesses Benefit:
- Lower personal tax rates mean people have more
money to spend, which can help businesses grow.
- Easier tax compliance under the new regime.
Which Tax Regime Should You Choose?
|
Choose the
New Regime If... |
Choose the
Old Regime If... |
|
You don’t
claim many deductions. |
You claim
deductions (80C, 80D, HRA, etc.). |
|
You want a simpler
tax system. |
You have high
medical or housing expenses. |
|
Your income
is below ₹12 lakh. |
You invest
in tax-saving schemes. |
Conclusion
The revised income tax slabs for FY 2025-26 aim to simplify
taxation and provide relief to middle-income earners. While the new tax regime
offers lower tax rates and easier compliance, the old regime remains beneficial
for those who claim deductions. Choosing the right tax structure depends on
your financial situation, investment habits, and long-term goals. Understanding
these changes can help individuals and businesses make informed financial
decisions, ensuring tax efficiency and better financial planning.
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