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

The Indian government’s revamped New Tax Regime under Section 115BAC has undergone significant changes for FY 2025-26, aimed at simplifying tax compliance and reducing liabilities for individuals. Here’s a breakdown of the updated structure:

Key Benefits

• Zero Tax for Incomes Up to ₹12.75 Lakh (Salaried):

  • Standard Deduction: Salaried taxpayers can claim ₹75,000, effectively making ₹12.75 lakh tax-free (₹12 lakh basic exemption + ₹75,000 deduction).

  • Tax Rebate: The ₹60,000 rebate under Section 87A ensures incomes up to ₹12 lakh face no tax liability.

• Lower Rates for Middle-Income Groups:

  • The 10% bracket now covers ₹8–12 lakh (vs. ₹9–12 lakh previously), reducing liabilities for middle-class earners.

  • The 25% slab (₹20–24 lakh) replaces the earlier 30% rate for this bracket.

Who Should Opt for the New Regime?

• Salaried Individuals Earning Under ₹12.75 Lakh: Maximizes tax-free income with minimal paperwork.

• Taxpayers with Limited Deductions: Beneficial if annual investments (e.g., PPF, insurance) are below ₹8–10 lakh.

• Simplicity Seekers: Eliminates the need to track multiple exemptions.

Critical Considerations

• No Major Deductions: HRA, LTA, and most Section 80C/80D benefits are unavailable.

• Higher Threshold for 30% Rate: The new regime’s 30% slab starts at ₹24 lakh vs. ₹10 lakh in the old regime.

Conclusion

The New Tax Regime’s simplified slabs and higher exemptions make it attractive for salaried professionals, especially those with incomes under ₹20 lakh. However, taxpayers with substantial investments or home loans should compare both regimes before switching.

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