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New Tax Regime FY 2025-26 (AY 2026-27): What Taxpayers Should Know?

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

The Union Budget 2025 proposed changes in the existing tax slabs of the new income tax regime, which are applicable from April 1, 2025, onwards. Here are the new tax rates:

Income Tax Slabs Rate of Taxation
Up to ₹4,00,000 Nil
Between ₹4,00,001 and ₹8,00,000  5% of your total income that exceeds ₹4,00,000 
Between ₹8,00,001 and ₹12,00,000   ₹20,000 + 10% of your total income that exceeds ₹8,00,000 
Between ₹12,00,001 and ₹16,00,000   ₹60,000 + 15% of your total income that exceeds ₹12,00,000 
Between ₹16,00,001 and ₹20,00,000   ₹1,20,000 + 20% of your total income that exceeds ₹16,00,000 
Between ₹20,00,001 and ₹24,00,000  ₹2,00,000 + 25% of your total income that exceeds ₹20,00,000 
Above ₹24,00,000   ₹3,00,000 + 30% of your total income that exceeds ₹24,00,000

Under this revised tax structure for FY 2025-26, individuals with earnings up to ₹12 lakh will not have to pay any tax thanks to an increased tax rebate of ₹60,000, under Section 87A.

What are the Changes in the New Tax Regime for FY 2025-26 (AY 2026-27)?

New Income Tax Regime Rates for FY 2024-25 (AY 2025-26)

If you want to know the new tax slabs revised by Union Budget 2024, to plan and calculate your tax, check out the table below. These new tax slab rates are applicable for FY 2024-25.

Income Tax Slabs Rate of Taxation
Up to ₹3,00,000  Nil
Between ₹3,00,001 and ₹7,00,000   5% of your total income that exceeds ₹3,00,000 
Between ₹7,00,001 and ₹10,00,000   ₹20,000 + 10% of your total income that exceeds ₹7,00,000 
Between ₹10,00,001 and ₹12,00,000  ₹50,000 + 15% of your total income that exceeds ₹10,00,000 
Between ₹12,00,001 and ₹15,00,000 ₹80,000 + 20% of your total income that exceeds ₹12,00,000 
Above ₹15,00,001   ₹1,40,000 + 30% of your total income that exceeds ₹15,00,000

What are the Existing Changes in the New Tax Regime for FY 2024-25 (AY 2025-26)?

Tax Deductions and Exemptions Under New Tax Regime for FY 2025-26

Category Tax Deductions and Exemptions ALLOWED
Standard Deduction
  • Standard deduction of ₹75,000.
  • Standard deduction of ₹25,000 for family pensioners or 1/3 of the family pension, whichever is less.
Basic Exemption Increased to ₹4 lakh by Budget 2025, from ₹3 lakh.
NPS
  • The benefit of any NPS contribution by the employer to the employee's NPS account is up to 14% of the salary for all employees.
  • The lump-sum maturity amount received from the NPS account.
Section 80JJAA Up to 30% of additional employee costs can be deducted.
Agni veer Corpus Fund Any contribution made to the Agni veer Corpus Fund.
Home Loan The interest component of a home loan borrowed for a rented property.
PPF and EPF
  • Tax deduction on employers' contributions to their employees' NPS EPF and superannuation accounts.
  • Taxpayers receiving interest from their EPF accounts for up to 9.5%.
  • Interest or maturity amount from PPF.
Savings Schemes
  • Interest received from Post Office Savings Account.
  • Maturity amount from a life insurance policy.
  • Interests and maturity amounts received from the Sukanya Samriddhi Account.
Allowances
  • Travel allowances to disabled employees, conveyance, travel, and daily allowances.
  • Up to ₹20 lakh exemption on gratuity for non-government employees and exemption on entire gratuity for government employees.
  • Gifts received from employers up to ₹5,000.
Retirement The leave encashment during retirement, monetary benefits received from employers for voluntary retirement up to ₹5 lakhs.
Other Education scholarships, retrenchment compensation, and monetary benefits for retirement cum death.

Category Tax Deductions and Exemptions NOT ALLOWED
Salary Deductions  HRA, LTA, professional tax of ₹2,500, professional tax, and entertainment allowance (applicable for government employees).
Section 80C  Investments made in the Employees’ Provident Fund, life insurance premium, and Public Provident Fund.
Home Loans 
  • Interest and principal amount of housing loans up to ₹1.5 lakhs.
  • Interest payment of home loan for self-occupied/ vacant property under Section 24(b).
  • Interest payment up to ₹2 lakhs for purchase/construction/ repair/reconstruction of house property under section 24(b).
  • Also, Budget 2025 proposed that two self-occupied properties will be tax-free. Earlier, only one self-occupied house was treated as tax-free, while the second house was taxed based on its notional rental value.
Section 80CCD(1B) 
  • The benefits available for NPS contributions under this Section will now apply to contributions made to NPS Vatsalya accounts, after Budget 2025.
  • So, a deduction of ₹50,000 is allowed under the NPS Vatsalya scheme only for the old regime.
Section 80E  Interest paid on the student loan debt under Section 80E can no longer be claimed for tax relief. 
Section 80G  Donation or expenses in scientific research, National Defense Fund, Prime Minister’s National Relief Fund, The National Foundation for Communal Harmony, National/State Blood Transfusion Council.
Savings Account 
  • Interest received from Savings Account under Section 80TTA and 80TTB. After Budget 2025, no TDS needs to be deducted if the interest income does not exceed ₹50,000. Previously, this limit was ₹40,000.
  • Special allowances under Section 10(14).
    Business professionals and owners in the Special Economic Zone cannot claim tax exemption under Section 10AA.
Other  
  • Tax deduction under Section 35(1)(ii), 35(2AA), 32AD, 32(ii) (a), 33AB, 35(1)(iii), 33ABA, 35(1)(ii), 35CCC(a), and 35AD of the IT Act. Deductions as specified under Chapter VI-A such as 80IA, 80CCC, 80C, 80CCD, 80D, 80CCG, 80DDB, 80EE, 80E, 80EEA, 80DD, 80EEB, 80GG, 80IB, 80IAC, and 80IAB.
  • Minor child, helper allowances, and allowances for children's education.

How to Save Tax Under New Tax Regime?

FAQs about New Income Tax Regime