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Comprehensive Guide to Tax Slabs in the New Tax Regime for AY 2025-26

March 15, 2025
Girish Chandhar

UNDERSTANDING INCOME TAX

Income tax is a direct tax imposed on an individual's earnings, with the Income-tax Act, 1961, specifying different tax slabs that dictate tax liability based on income brackets. The tax landscape has evolved, giving taxpayers more flexibility in choosing between two tax regimes: the old tax regime and the new tax regime.

TAX APPLICABILITY ACROSS DIFFERENT ENTITIES

Entities and Their Tax Rates

  • Individuals and HUF (Hindu Undivided Family):Follow the new tax slab rates with progressive taxation
  • Domestic Companies:- 25% tax rate if total turnover in FY 2020-21 does not exceed ₹400 crores - 30% tax rate if turnover exceeds ₹400 crores
  • Partnership Firms and LLPs:Flat tax rate of 30%
  • Association of Persons (AOP):Taxation varies based on income assessment and member composition

NEW TAX REGIME SLAB RATES FOR AY 2025-26

Annual IncomeIncome Tax Rate
Up to INR 3,00,000NIL
INR 3,00,001 - INR 7,00,0005%
INR 7,00,001 - INR 10,00,00010%
INR 10,00,001 - INR 12,00,00015%
INR 12,00,001 - INR 15,00,00020%
Above INR 15,00,00030%

KEY CHANGES AND BENEFITS

Tax Rebate

Assessee can claim a tax rebate of INR 25,000/- up to a Total Income of INR 7,00,000/-. This effectively means no tax is required to be paid up to INR 7,00,000/-.

Standard Deduction

Standard deduction for salaried employees is Rs. 75,000 under the new regime, providing additional tax relief.

EVOLUTION OF TAX SLABS

Financial YearTax Slab Changes
FY 2020-21
  • Up to INR 2.5L: NIL
  • INR 2.5L - 5L: 5%
  • INR 5L - 7.5L: 10%
  • INR 7.5L - 10L: 15%
  • INR 10L - 12.5L: 20%
  • INR 12.5L - 15L: 25%
  • Above INR 15L: 25%
FY 2023-24
  • Up to INR 3L: NIL
  • INR 3L - 6L: 5%
  • INR 6L - 9L: 10%
  • INR 9L - 12L: 15%
  • INR 12L - 15L: 20%
  • Above INR 15L: 25%
FY 2024-25
  • Up to INR 3L: NIL
  • INR 3L - 7L: 5%
  • INR 7L - 10L: 10%
  • INR 10L - 12L: 15%
  • INR 12L - 15L: 20%
  • Above INR 15L: 30%

OLD VS NEW TAX REGIME

Old Tax Regime

  • Up to INR 2,50,000: NIL
  • INR 2,50,001 - INR 5,00,000: 5%
  • INR 5,00,001 - INR 10,00,000: 20%
  • Above INR 10,00,001 - INR 12,00,000: 30%

New Tax Regime

  • Up to INR 3,00,000: NIL
  • INR 3,00,001 - INR 7,00,000: 5%
  • INR 7,00,001 - INR 10,00,000: 10%
  • INR 10,00,001 - INR 12,00,000: 15%
  • INR 12,00,001 - INR 15,00,000: 20%
  • Above INR 15,00,000: 30%

HOW TO CHOOSE YOUR TAX REGIME

While the government allows taxpayers to choose between two tax regimes, we recommend calculating taxes under both to determine the most advantageous option for your specific financial situation.

Opt-Out Process

The Income Tax Department has set the New Tax Regime as the default in ITR forms. Taxpayers must manually opt out if they wish to switch to the Old Tax Regime.

For Salaried Individuals:

No additional forms required. Can directly opt out at the time of filing ITR.

For Business Income:

Form 10 - IEA must be furnished prior to ITR and within the due date of filing.

OUR FINAL RECOMMENDATIONS

  • Carefully analyze your income sources and potential deductions under both tax regimes.
  • Consider factors like investment declarations, tax-saving instruments, and potential future income changes.
  • Consult with a tax professional to make an informed decision tailored to your specific financial situation.
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