Tax Slab
Definition
Tax slabs are the income ranges at which different tax rates apply under India's progressive income tax system. For FY 2025-26, the New Tax Regime (default) has 7 slabs ranging from 0% (up to ₹4 Lakh) to 30% (above ₹24 Lakh), with a full tax rebate under Section 87A for income up to ₹12 Lakh. The Old Tax Regime has 4 slabs (0% up to ₹2.5L, 5% for ₹2.5-5L, 20% for ₹5-10L, 30% above ₹10L) and allows deductions under 80C, 80D, HRA, LTA etc. The New Regime is the default from FY 2024-25; opting for Old Regime requires filing Form 10-IEA.
Why is Tax Slab Important?
Navigating the Indian tax system requires a clear understanding of terms like Tax Slab. With the introduction of the new income tax regime alongside the old one, taxpayers must evaluate their deductions, exemptions, and tax brackets carefully. This concept is a key component in optimizing your tax liabilities under the Income Tax Act and GST framework.
Proper tax planning using this metric can help individuals and businesses maximize their take-home income while remaining fully compliant with government regulations. We provide free tax calculators to help you estimate these figures accurately and make informed decisions before filing your returns.
What Are Income Tax Slabs?
Income tax slabs are predefined income ranges at which different tax rates apply. India follows a progressive tax system — meaning higher income is taxed at a higher rate. Your total income isn't taxed at a single rate; instead, each portion of your income falling within a specific slab is taxed at the rate applicable to that slab.
For example, if your taxable income is ₹15 Lakh, only the portion above ₹12 Lakh is taxed at the higher slab rate, not the entire ₹15 Lakh.
New Tax Regime Slabs — FY 2025-26 (AY 2026-27)
The New Tax Regime became the default option from FY 2024-25. Budget 2025 further revised the slabs to make them more taxpayer-friendly:
| Taxable Income (₹) | Tax Rate | Tax on This Slab |
|---|---|---|
| 0 – 4,00,000 | Nil | ₹0 |
| 4,00,001 – 8,00,000 | 5% | ₹20,000 |
| 8,00,001 – 12,00,000 | 10% | ₹40,000 |
| 12,00,001 – 16,00,000 | 15% | ₹60,000 |
| 16,00,001 – 20,00,000 | 20% | ₹80,000 |
| 20,00,001 – 24,00,000 | 25% | ₹1,00,000 |
| Above 24,00,000 | 30% | Varies |
Key change in Budget 2025: Basic exemption limit raised to ₹4 Lakh (from ₹3 Lakh), and Section 87A rebate extended to ₹12 Lakh (from ₹7 Lakh), meaning income up to ₹12 Lakh is effectively tax-free under the New Regime.
Old Tax Regime Slabs — FY 2025-26
| Taxable Income (₹) | Tax Rate | Tax on This Slab |
|---|---|---|
| 0 – 2,50,000 | Nil | ₹0 |
| 2,50,001 – 5,00,000 | 5% | ₹12,500 |
| 5,00,001 – 10,00,000 | 20% | ₹1,00,000 |
| Above 10,00,000 | 30% | Varies |
The Old Regime has not been changed in Budget 2025. Section 87A rebate remains at ₹12,500 for income up to ₹5 Lakh. However, the Old Regime allows extensive deductions (80C, 80D, HRA, LTA, home loan interest, etc.) which can significantly reduce taxable income.
New Regime vs Old Regime — Side-by-Side Comparison
| Feature | New Tax Regime (Default) | Old Tax Regime |
|---|---|---|
| Basic Exemption | ₹4,00,000 | ₹2,50,000 |
| Number of Slabs | 7 (0% to 30%) | 4 (0% to 30%) |
| Highest Rate Kicks In | Above ₹24 Lakh | Above ₹10 Lakh |
| Section 87A Rebate | Up to ₹12 Lakh (₹60,000 rebate) | Up to ₹5 Lakh (₹12,500 rebate) |
| Standard Deduction | ₹75,000 | ₹50,000 |
| Section 80C (₹1.5L) | ❌ Not allowed | ✅ Allowed |
| Section 80D (Health Insurance) | ❌ Not allowed | ✅ Allowed (₹25K-1L) |
| HRA Exemption | ❌ Not allowed | ✅ Allowed |
| Home Loan Interest (24b) | ❌ Not allowed | ✅ Up to ₹2 Lakh |
| LTA | ❌ Not allowed | ✅ Allowed |
| NPS — Employer (80CCD2) | ✅ Allowed (14% of salary) | ✅ Allowed (14% of salary) |
| Default Regime | ✅ Yes (from FY 2024-25) | Requires Form 10-IEA to opt in |
Section 87A Tax Rebate — Updated FY 2025-26
| Detail | New Regime | Old Regime |
|---|---|---|
| Income Limit for Rebate | ₹12,00,000 | ₹5,00,000 |
| Maximum Rebate Amount | ₹60,000 | ₹12,500 |
| Effective Tax-Free Income | ₹12,75,000 (with ₹75K standard deduction) | ₹5,00,000 |
What this means: A salaried employee earning up to ₹12.75 Lakh (gross) pays zero tax under the New Regime after claiming the ₹75,000 standard deduction and ₹60,000 Section 87A rebate.
Surcharge Rates — FY 2025-26
Surcharge is an additional tax on high incomes, levied on the income tax amount:
| Taxable Income | Surcharge Rate |
|---|---|
| Up to ₹50 Lakh | Nil |
| ₹50 Lakh – ₹1 Crore | 10% |
| ₹1 Crore – ₹2 Crore | 15% |
| ₹2 Crore – ₹5 Crore | 25% |
| Above ₹5 Crore | 25% (New Regime capped) / 37% (Old Regime) |
Note: Under the New Tax Regime, the maximum surcharge is capped at 25% (no 37% bracket). This makes the New Regime more favourable for incomes above ₹5 Crore.
After surcharge, Health and Education Cess at 4% is applied on (Income Tax + Surcharge) to arrive at the final tax liability.
Worked Example — ₹15 Lakh Income (Both Regimes)
New Tax Regime
| Slab | Income in Slab | Rate | Tax |
|---|---|---|---|
| ₹0 – ₹4L | ₹4,00,000 | 0% | ₹0 |
| ₹4L – ₹8L | ₹4,00,000 | 5% | ₹20,000 |
| ₹8L – ₹12L | ₹4,00,000 | 10% | ₹40,000 |
| ₹12L – ₹15L | ₹3,00,000 | 15% | ₹45,000 |
| Income Tax | ₹1,05,000 | ||
| + Cess (4%) | ₹4,200 | ||
| Total Tax (New Regime) | ₹1,09,200 | ||
Old Tax Regime (With Deductions)
| Component | Amount |
|---|---|
| Gross Income | ₹15,00,000 |
| Less: Standard Deduction | ₹50,000 |
| Less: Section 80C (EPF + PPF + ELSS) | ₹1,50,000 |
| Less: Section 80D (Health Insurance) | ₹25,000 |
| Less: HRA Exemption | ₹1,80,000 |
| Taxable Income | ₹10,95,000 |
| Slab | Income in Slab | Rate | Tax |
|---|---|---|---|
| ₹0 – ₹2.5L | ₹2,50,000 | 0% | ₹0 |
| ₹2.5L – ₹5L | ₹2,50,000 | 5% | ₹12,500 |
| ₹5L – ₹10L | ₹5,00,000 | 20% | ₹1,00,000 |
| ₹10L – ₹10.95L | ₹95,000 | 30% | ₹28,500 |
| Income Tax | ₹1,41,000 | ||
| + Cess (4%) | ₹5,640 | ||
| Total Tax (Old Regime) | ₹1,46,640 | ||
Result: At ₹15 Lakh with ₹4.05 Lakh deductions, the New Regime saves ₹37,440. For the Old Regime to be better, you'd need deductions exceeding ~₹5.5 Lakh.
Which Regime Should You Choose?
| Your Situation | Better Regime | Why |
|---|---|---|
| Salaried, minimal investments | New Regime | Lower rates, ₹75K standard deduction, ₹12L rebate |
| Income ≤ ₹12 Lakh | New Regime | Zero tax with Section 87A rebate |
| Heavy HRA + 80C + 80D investor | Old Regime | ₹4-6 Lakh deductions reduce taxable income significantly |
| Has Home Loan (24b interest) | Old Regime | ₹2 Lakh interest deduction + 80C principal deduction |
| Self-employed, no deductions | New Regime | Simpler, lower rates, no documentation hassle |
| Income above ₹5 Crore | New Regime | Surcharge capped at 25% vs 37% in Old Regime |
| NPS contributor (employer) | Either | Employer NPS (80CCD2) allowed in both regimes |
Senior Citizen Tax Slabs — FY 2025-26
Senior Citizens (Age 60-80) — Old Regime Only
| Taxable Income (₹) | Tax Rate |
|---|---|
| 0 – 3,00,000 | Nil |
| 3,00,001 – 5,00,000 | 5% |
| 5,00,001 – 10,00,000 | 20% |
| Above 10,00,000 | 30% |
Super Senior Citizens (Age 80+) — Old Regime Only
| Taxable Income (₹) | Tax Rate |
|---|---|
| 0 – 5,00,000 | Nil |
| 5,00,001 – 10,00,000 | 20% |
| Above 10,00,000 | 30% |
Note: Under the New Tax Regime, there is no special exemption for senior or super senior citizens. The same slab structure applies to all ages. Age-based higher exemption limits apply only in the Old Regime.
Deductions Available in New Tax Regime
While most deductions are unavailable in the New Regime, these are still allowed:
- Standard Deduction: ₹75,000 for salaried individuals and pensioners
- Section 80CCD(2): Employer's contribution to NPS (up to 14% of salary for govt, 10% for private)
- Section 80CCH(2): Agniveer Corpus Fund deduction
- Section 10(10C): Voluntary Retirement exemption (up to ₹5 Lakh)
- Section 10(10): Gratuity exemption (up to ₹20 Lakh)
- Section 10(10AA): Leave encashment exemption on retirement (up to ₹25 Lakh)
- Transport allowance: For specially-abled employees
- Conveyance allowance: For expenses on official duty
Key Changes in Budget 2025
- Basic exemption raised: ₹3 Lakh → ₹4 Lakh (New Regime)
- Section 87A rebate enhanced: ₹7 Lakh → ₹12 Lakh (₹25,000 → ₹60,000 rebate)
- Standard deduction increased: ₹50,000 → ₹75,000 (New Regime)
- TDS threshold on interest (senior citizens): ₹50,000 → ₹1 Lakh
- TDS on rent: Threshold increased to ₹6 Lakh/year (from ₹2.4 Lakh)
- New Income Tax Bill: To replace the 1961 Act — simplified language, same tax rates