Explore the detailed breakdown of the New Tax Regime for FY 2025-26, including tax slabs, deductions, and exemptions to help you make informed financial decisions.
Tax Slab Rates for FY 2025-26
Standard Deduction Changes
Surcharge Details
Income Tax Exemption up to ₹12 Lakh
Available Deductions
Leave Encashment Exemption
Old vs New Tax Regime
Taxability of PF and VPF
Agniveer Corpus Fund Withdrawals
Standard Deduction and Tax Calculation
Income Threshold for Tax Exemption
Switching Between Regimes
Presumptive Taxation
Advantages of the New Regime
Insurance Proceeds Taxability
Section 80C Deduction
Home Loan Interest Deduction
FAQs on New Tax Regime 2026
Understanding the Tax Slabs
The tax slabs for FY 2025-26 under the New Tax Regime are structured to provide relief to taxpayers.
Income up to ₹4 lakh: NIL
Income from ₹4 lakh to ₹8 lakh: 5%
Income from ₹8 lakh to ₹12 lakh: 10%
Higher Income Slabs
For higher income brackets, the tax rates increase progressively.
Income from ₹12 lakh to ₹16 lakh: 15%
Income from ₹16 lakh to ₹20 lakh: 20%
Income above ₹24 lakh: 30%
Worked Example
Calculate tax for an income of ₹15 lakh.
Income from ₹0 to ₹4 lakh: NIL
Income from ₹4 lakh to ₹8 lakh: ₹20,000 (5%)
Income from ₹8 lakh to ₹12 lakh: ₹40,000 (10%)
Income from ₹12 lakh to ₹15 lakh: ₹45,000 (15%)
Standard Deduction Details
The standard deduction for salaried individuals remains unchanged.
Standard deduction of ₹75,000 is applicable.
No additional changes for FY 2025-26.
Applicable to both salaried individuals and pensioners.
Surcharge Rates
The surcharge rates have been revised for high-income earners.
Income above ₹50 lakh: 10%
Income above ₹1 crore: 15%
Income above ₹2 crore: 25%
Reduction in Surcharge
A significant reduction in surcharge for ultra-high-income earners.
Income above ₹5 crore: 25% (reduced from 37%)
Applies only under the New Tax Regime.
Aimed at reducing tax burden on ultra-high-income earners.
Rebate under Section 87A
A rebate is available for resident individuals.
Rebate applicable for income up to ₹12 lakh.
Tax liability reduced to zero for eligible individuals.
Rebate only for resident individuals.
Deductions Under New Regime
Limited deductions are available under the New Tax Regime.
Standard deduction of ₹75,000 for salaried individuals.
Employer's contribution to NPS up to 14% of salary.
Interest on home loan for let-out property under Section 24(b).
Leave Encashment Details
Exemption on leave encashment is available.
Exemption up to ₹25 lakh for non-government employees.
Applicable at the time of retirement.
Covered under Section 10(10AA).
Comparison of Regimes
Choosing between the old and new tax regimes depends on individual circumstances.
Old regime allows more deductions under Section 80C.
New regime offers simplified tax slabs.
Evaluate based on your income and deductions.
Provident Fund Contributions
Contributions to PF and VPF are treated differently under the new regime.
No Section 80C deduction under the new regime.
Interest income on PF is taxable beyond ₹2.5 lakh contribution.
Employer's contribution to EPF is taxable beyond ₹7.5 lakh.
Tax Exemption on Withdrawals
Withdrawals from the Agniveer Corpus Fund are tax-free.
Exemption under Section 10(12C).
Applicable under both old and new regimes.
Encourages savings for Agniveers.
Impact of Standard Deduction
Calculate tax liability with the standard deduction.
Income of ₹12,75,000 with ₹75,000 deduction.
Tax calculated on ₹12 lakh after deduction.
Rebate under Section 87A reduces tax to zero.
Exemption Threshold
Determine the income threshold for tax exemption.
Threshold set at ₹12 lakh for resident individuals.
Rebate under Section 87A applies.
No tax liability for income up to ₹12 lakh.
Flexibility in Choosing Regimes
Understand the rules for switching between tax regimes.
Salaried individuals can switch annually.
Business income earners can switch once.
Evaluate tax savings before switching.
Presumptive Taxation Rules
Presumptive taxation simplifies tax filing for small businesses.
Applicable under Section 44AD for businesses.
8% of turnover deemed as income.
Turnover limit of ₹2 crore for eligibility.
Benefits of the New Regime
Explore the advantages of opting for the New Tax Regime.
Simplified tax slabs and rates.
Reduced compliance burden.
Beneficial for taxpayers with fewer deductions.
Taxation of Insurance Proceeds
Understand the tax implications of insurance proceeds.
Proceeds from life insurance policies are tax-free.
Premiums paid are not deductible under the new regime.
Section 10(10D) covers tax-free proceeds.
Section 80C Exclusion
Section 80C deductions are not available under the new regime.
Investments in PPF, ELSS, etc., not deductible.
Consider old regime for 80C benefits.
₹1.5 lakh deduction available in old regime.
Interest Deduction on Home Loans
Interest on home loans is deductible under specific conditions.
Deduction under Section 24(b) for let-out property.
No deduction for self-occupied property interest.
Consider old regime for Section 80EEA benefits.
What is the tax rebate under the New Tax Regime?
Under the New Tax Regime, a rebate under Section 87A is available for resident individuals with income up to ₹12 lakh, reducing their tax liability to zero.
Can I claim HRA under the New Tax Regime?
No, the New Tax Regime does not allow exemptions for House Rent Allowance (HRA). Consider the old regime if HRA is a significant component of your salary.
How does the surcharge apply to my income?
Surcharge rates vary based on income levels, starting at 10% for income above ₹50 lakh and capping at 25% for income above ₹5 crore under the New Tax Regime.
Are deductions for medical insurance premiums available?
No, deductions under Section 80D for medical insurance premiums are not available under the New Tax Regime. These are only available under the old regime.
What is the tax treatment for capital gains?
Capital gains are taxed separately and are not affected by the choice of tax regime. Long-term capital gains (LTCG) are taxed at 20% after indexation.
Can I switch tax regimes every year?
Salaried individuals can switch between tax regimes annually, while those with business income can switch only once in a lifetime.
Is the standard deduction applicable to pensioners?
Yes, pensioners can claim a standard deduction of ₹75,000 under the New Tax Regime, similar to salaried individuals.
Are gifts taxable under the New Tax Regime?
Gifts up to ₹50,000 are exempt from tax. Any amount exceeding this limit is taxable as income under the New Tax Regime.
How does the New Tax Regime affect senior citizens?
Senior citizens do not receive additional benefits under the New Tax Regime. Consider the old regime for higher exemption limits and deductions.
What forms are required for filing under the New Tax Regime?
Use ITR-1 for salaried individuals and ITR-2 for those with additional income sources. Ensure you select the correct form based on your income sources.