As per a report published by NDTV, Income Tax has contributed 32% in the Indian government's income in the FY 2025-26.
It means that the tax contribution from the public plays a vital role in the income generation of the country and its development, too. This fact makes it more important to understand the detailed concept of the new tax regime slabs in India.
The Government of India introduced the new tax regime to simplify the taxation system with revised income tax slabs and lower tax rates. Under the new tax regime for FY 2025-26 (AY 2026-27), taxpayers get the benefit of simplified tax slabs with fewer deductions and exemptions.
In this blog, we will understand the new tax regime slabs in India, tax rates, and how the new tax regime works for different income groups.
What is the New Tax Regime?
The new tax regime was introduced by the Government of India in the Union Budget 2020 under Section 115BAC of the Income Tax Act, 1961. It was introduced to simplify the taxation system for individuals, Hindu Undivided Families (HUFs), and Associations of Persons in India.
Under the new tax regime, taxpayers get lower income tax rates with fewer deductions and exemptions. The basic exemption limit under this regime is Rs 4 lakh for FY 2025-26 (AY 2026-27).
New Tax Regime Slabs for FY 2025-26 (AY 2026-27)
Under the new tax regime, income tax is calculated progressively. This means different tax rates apply to different portions of income instead of the entire salary being taxed at one rate.
This table shows the new Income Tax regime slabs to make you understand better:
| Annual Income | Tax Rate |
|---|---|
| Up to Rs 4 lakh | Nil |
| Rs 4 lakh to Rs 8 lakh | 5% |
| Rs 8 lakh to Rs 12 lakh | 10% |
| Rs 12 lakh to Rs 16 lakh | 15% |
| Rs 16 lakh to Rs 20 lakh | 20% |
| Rs 20 lakh to Rs 24 lakh | 25% |
| Above Rs 24 lakh | 30% |
Note: Under the new tax regime, the same income tax slab rates apply to all taxpayers, regardless of age.
Is It Mandatory to Follow the Income Tax Slabs New Regime?
The answer is No!
Following the new income tax regime is not mandatory for all taxpayers. Individuals can choose between the old tax regime and the new tax regime based on their income, deductions, and financial planning needs.
However, the new tax regime is the default tax regime under Section 115BAC of the Income Tax Act. If a taxpayer wants to continue with the old tax regime, they need to choose it while filing the income tax return.
Is there Any New Tax Regime Calculator?
Yes, you can use the new tax regime calculator given on the income tax portal to know about your taxable income. Here are the steps for the same:
- 1.Visit the official Income Tax calculator site.
- 2.Now select the assessment year you consider.
- 3.Then select the taxpayer type and choose other details based on your income.
- 4.Click on the “Calculate” button to get the estimated tax liability.
Features of the New Tax Regime
Here are some of the key features of the new tax regime in India:
- It offers a lower tax rate compared to the old tax regime.
- Tax payers gets lesser deductions and exemptions.
- It is the default under Section 115BAC.
- No separate tax slab for different groups.
- Provides a basic exemption limit of Rs 4 lakh.
- Offers a higher rebate under Section 87A for eligible taxpayers.
- Suitable for taxpayers with fewer tax-saving investments and deductions.
Deductions Allowed Under the New Tax Regime
The new tax regime offers lower tax rates with limited deductions and exemptions. Here are some major deductions allowed:
| Tax Benefit | Availability Under the New Tax Regime |
|---|---|
| Rebate under Section 87A | Available up to Rs 60,000 for income up to Rs 12 lakh |
| Standard Deduction | Available up to Rs 75,000 |
| Employer's Contribution to NPS | Allowed under specified conditions |
Here is a simple calculation:
- Gross Income: Rs 12.75 lakh
- Standard Deduction: Rs 75,000
- Taxable Income: Rs 12 lakh
- Tax amount for Rs 12 lakh: Rs 60,000
- Rebate under Section 87A: Up to Rs 60,000
- Net Payable Tax (tax - rebate): Rs 0
Deductions Not Allowed Under the New Tax Regime
Many commonly used deductions and exemptions available under the old tax regime are not allowed under the new tax regime.
| Tax Benefit | Availability Under the New Tax Regime |
|---|---|
| Section 80C Deductions | Not Allowed |
| HRA Exemption | Not Allowed |
| Home Loan Interest on Self-Occupied Property | Not Allowed |
| Section 80D Deduction | Not Allowed |
| Set-off of House Property Losses | Not Allowed |
| Employee's Own Contribution to NPS | Not Fully Allowed |
Difference Between Old and New Tax Regime
This table helps you to differentiate between the old and the new tax regimes:
| Basis | Old Tax Regime | New Tax Regime |
|---|---|---|
| Tax Rates | Higher tax rates | Lower tax rates |
| Deductions & Exemptions | Multiple deductions and exemptions available | Limited deductions and exemptions available |
| Section 80C Benefit | Allowed | Not Allowed |
| HRA Exemption | Available | Not Available |
| Standard Deduction | Rs 50,000 | Rs 75,000 |
| Basic Exemption Limit | Different for different age groups | Same for all age groups |
| Tax Calculation | Comparatively complex | Simpler and easier |
| Suitable For | Taxpayers with higher investments and deductions | Taxpayers with fewer deductions and exemptions |
| Default Tax Regime | No | Yes, under Section 115BAC |
Who Should Choose the New Tax Regime?
The new tax regime is suitable for:
- Salaried individuals with limited tax-saving investments.
- Taxpayers who do not claim deductions like Section 80C, HRA, or home loan interest.
- Young professionals who want a simple tax calculation process.
- Individuals who prefer lower tax rates instead of multiple exemptions.
- Taxpayers with straightforward income structures and fewer investment declarations.
Note: Individuals who regularly claim higher deductions and exemptions under the old tax regime should compare both tax regimes carefully before making a decision.
Latest Budget Updates on the New Tax Regime
- The term 'Tax Year' is being introduced in place of Financial Year (FY) and Assessment Year (AY) to simplify tax terminology. It is the duration for which tax is calculated and paid to the government.
- There are some major changes in form submission:
Note: Only Form 16 (now 130) is for salaried employees.
Old Form Name New Form Name Form 16 Form 130 Form 16A Form 131 Form 12BB Form 124 Form 26AS Form 168 - From April 2026, the last date to file ITR-3 and ITR-4 has changed from 31st July to 31st August. These categories do not require a tax audit. The due date remains the same for ITR-1 and ITR-2.
Conclusion
To conclude, the new tax regime slab in India suits the needs of taxpayers who prefer lower tax rates with a simpler taxation structure. It can be beneficial for salaried individuals, professionals, and taxpayers who do not claim many deductions.
However, before choosing any tax regime, taxpayers should carefully compare both the old and new tax regimes. The comparison should be based on their income, deductions, and financial planning needs.
FAQs
The new tax regime is a simplified income tax system with lower tax rates and fewer deductions and exemptions.
The basic exemption limit under the new tax regime is Rs 4 lakh for FY 2025-26 (AY 2026-27).
No, taxpayers can choose between the old tax regime and the new tax regime based on their financial needs.
Yes, salaried individuals can claim a standard deduction of Rs 75,000 under the new tax regime.
No, Section 80C deductions are generally not available under the new tax regime.
The new tax regime suits taxpayers who do not claim many deductions and prefer a simpler tax structure.
