Income Tax Slabs FY 2025-26 (AY 2026-27): New & Old Regime Rates

Income tax slabs fix the rate at which each slice of your income is taxed. For FY 2025-26 (AY 2026-27) an individual or HUF is taxed under one of two structures: the new regime, which is the default under section 115BAC, and the old regime, which allows most Chapter VI-A deductions. This guide sets out both slab tables, the Section 87A (Section 156 of the Income-tax Act, 2025) rebate, the standard deduction, surcharge and cess.

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

The new regime is the default for FY 2025-26. If you do not actively opt for the old regime, these rates apply to your total income. The rates are progressive, so each band of income is taxed at its own slab rate.

Take a resident with a total income of ₹10 lakh for FY 2025-26. The slab tax works out to ₹40,000, but the Section 87A rebate covers it fully, so the final tax is nil. You can test any income level with the income tax calculator.

Section 87A Rebate: Zero Tax Up to ₹12 Lakh

A resident individual whose total income does not exceed ₹12,00,000 gets a rebate of up to ₹60,000 under section 87A for FY 2025-26. In practice this makes income up to ₹12 lakh effectively tax-free in the new regime. The rebate applies only to tax computed at normal slab rates.

Special-rate income sits outside the rebate. Short-term and long-term capital gains, for example, are taxed at their own rates, and the rebate does not reduce that tax. Taxpayers with gains should therefore expect some tax even when their other income is below ₹12 lakh.

Marginal relief just above ₹12 lakh

If total income slightly exceeds ₹12,00,000, marginal relief caps the extra tax. The tax payable cannot exceed the amount by which the income crosses ₹12 lakh, apart from the cess. The jump from zero tax at ₹12 lakh to tax just above it is therefore a gentle slope, not a cliff.

Standard Deduction: ₹75,000 in the New Regime

Salaried employees and pensioners get a standard deduction of ₹75,000 for FY 2025-26 in the new regime. This means gross salary up to about ₹12,75,000 lands at a total income of ₹12 lakh or less after the deduction. After the 87A rebate, such taxpayers owe no income tax at all. The old regime, by comparison, offers a standard deduction of only ₹50,000.

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

The old regime remains optional and rewards taxpayers who use deductions well. It keeps the familiar slab structure and the older rebate limits, as shown below.

Under the old regime the 87A rebate is up to ₹12,500 where total income stays within ₹5,00,000, making such incomes tax-free. The standard deduction is ₹50,000, and deductions such as 80C, 80D and HRA remain available. Our detailed comparison of the old versus new tax regime shows when the old regime still wins.

Surcharge and Health & Education Cess

Surcharge applies on income tax when total income crosses ₹50 lakh. The new regime caps the maximum surcharge at 25%, while the old regime can reach 37% above ₹5 crore. A 4% health and education cess is added on tax plus surcharge in both regimes.

Slabs Under the Income-tax Act, 2025

The Income-tax Act, 2025 replaces the 1961 Act from 1 April 2026, so it governs FY 2026-27 onwards. The FY 2025-26 slab structure shown above carries into the new Act for individuals. The rates you compute for AY 2026-27 therefore remain the reference point going forward. Always confirm the latest Finance Act changes before finalising long-term tax plans.

Key Takeaways

• New regime slabs for FY 2025-26 run from nil up to ₹4 lakh to 30% above ₹24 lakh.
• Residents with total income up to ₹12 lakh pay zero tax in the new regime due to the ₹60,000 rebate.
• The ₹75,000 standard deduction makes gross salary up to ₹12.75 lakh effectively tax-free in the new regime.
• The old regime keeps the ₹2.5 lakh, ₹5 lakh and ₹10 lakh slabs with a ₹12,500 rebate up to ₹5 lakh income.
• Surcharge peaks at 25% in the new regime and 37% in the old regime, plus 4% cess in both.

Frequently Asked Questions

Which tax regime is the default for FY 2025-26?

The new regime under section 115BAC is the default for FY 2025-26 (AY 2026-27). The old regime is optional and must be chosen actively. Salaried employees indicate the regime in their employer declarations or directly in the ITR.

Is salary up to ₹12.75 lakh really tax-free now?

Yes, for resident individuals in the new regime. The ₹75,000 standard deduction brings gross salary of ₹12,75,000 down to ₹12,00,000, and the 87A rebate then wipes out the tax. Remember that special-rate income such as capital gains stays outside the rebate.

Does the ₹12 lakh rebate apply to capital gains?

No. The 87A rebate covers only tax on income charged at normal slab rates. Capital gains taxed at special rates remain payable even if your other income is below ₹12 lakh for FY 2025-26.

What is the highest surcharge in the new regime?

The new regime caps surcharge at 25% of tax, which applies where total income exceeds ₹2 crore. The old regime charges up to 37% where income crosses ₹5 crore. A 4% health and education cess applies on tax plus surcharge in both regimes.

Will slab rates change under the Income-tax Act, 2025?

The Income-tax Act, 2025 takes effect from 1 April 2026 and retains the FY 2025-26 slab structure for individuals. Any change would need a fresh Finance Act or notification. Check the official portal before applying rates to a later year.

Disclaimer: Tax laws change frequently. Verify current rates and deadlines on the official portals (incometax.gov.in, gst.gov.in) or consult a qualified professional before acting.