Income Tax Slab FY 2025-26 (AY 2026-27)

The new tax regime and its slab rates are part of Section 115BAC of the Income Tax Act, 1961. As part of the Budget 2025 announcement, new income tax slab rates have been introduced and these will be applicable on income earned post April 1, 2025. The new tax regime slab rates for AY 2026-27 are as shown below:

As mentioned earlier, the Union Budget 2025 announcement has retained the income tax slab rates of FY 2024-25 for the old tax regime. So, the income tax slab rates under old tax regime for salaried and self-employed individuals up to 60 years of age in FY 2025-26 will look like this:

The above old tax regime slabs and rates are also applicable to Hindu Undivided Family (HUF) taxpayers as well as other non-individual tax payers such as Association of Persons (AoP), Body of Individuals (BoI), etc. for AY 2026-27.

The new tax regime slabs and rates are applicable to all individual tax payers irrespective of their age. However, individual tax payers aged 60 years to less than 80 years are designated as senior citizens and they get a higher exemption limit under the old tax regime. The below table illustrates the income tax slabs and rates under the old tax regime for senior citizen tax payers in AY 2026-27:

As the income tax slabs have remained unchanged in FY 2025-26, the old tax regime will continue to provide a higher exemption limit to super senior citizen taxpayers i.e. individuals aged 80 years or more. The below table illustrates the old tax regime slab rates applicable to super senior citizen tax payers aged 80 years or more in AY 2026-27:

Apart for the new income tax slab rates under the new tax regime, the Union Budget 2025 further sweetened the deal with the announcement of net zero tax for annual net taxable income up to Rs. 12 lakh. This has been achieved through an amendment in the existing provision under Section 87A.

Prior to Budget 2025 announcement, Section 87A offered a 100% tax rebate on income up to Rs. 20,000 for those with net taxable income of up to Rs. 7 lakh in FY 2024-25, if one has opted for the new tax regime. This limit has now been increased for FY 2025-26. So, individual tax payers who opt for the new tax regime and have annual taxable income of up to Rs. 12 lakh will be eligible for 100% tax rebate up to Rs. 60,000.

This is even better news for salaried individuals and pensioners who opt for the new tax regime. Such individuals are eligible for a standard deduction of Rs. 75,000 annually. So, with introduction of the new zero net tax threshold limit, such individuals will effective not have to pay any income tax on net taxable income up to Rs. 12.75 lakh in AY 2026-27.

The Budget 2025 announcement has seemingly made the new tax regime even more lucrative with higher net tax limit and lower slab rates for eligible tax payers. However, one should keep in mind that traditional tax saving expenses and investments such as life insurance premiums, Unit Linked Insurance Plan investments, ELSS investments, Public Provident Fund investments, etc. are not eligible for tax benefits if one opts for the new tax regime. So, tax payers should definitely crunch the numbers and, if required, seek the help of a tax professional to figure out which tax regime is better suited to their needs.