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

Let’s have a look at what the new Union Budget holds for people in the Financial Year (FY) 2025-26 and Assessment Year (AY) 2026-27.

Highlights of Union Budget 2025 for Income Tax Slab Rates for FY 2025-26 (AY 2026-27)

Following are the key highlights announced under the recently announced Union Budget 2025:

1. Progressive Tax Slabs Rates under New Tax Regime: 

   Income Range	Tax Rate
   ₹0 - ₹4,00,000	No Tax
   ₹4,00,001 - ₹8,00,000	5%
   ₹8,00,001 - ₹12,00,000	10%
   ₹12,00,001 - ₹16,00,000	15%
   ₹16,00,001 - ₹20,00,000	20%
   ₹20,00,001 - ₹24,00,000	25%
   ₹24,00,001 and Above	30%

   Middle-Class Relief: The 2025 budget provides significant relief to the middle class by introducing comprehensive income tax reforms.

2. Increased Tax-Free Income Limit: 

   The tax-free income threshold has been raised to ₹12 lakh per annum. Now, salaried taxpayers can earn up to ₹12.75 lakh, thanks to a standard deduction of ₹75,000, without paying any tax.

3. Nil Tax for Income up to ₹4 Lakh: 

   For individuals earning above ₹12 lakh, the new tax regime provides a progressive system, offering nil tax for income up to ₹4 lakh.

4. Extended Reassessment Period: 

   The income tax revaluation deadline has been increased from 2 years to 4 years.

5. Tax Return Filing Window: 

   The new tax rules provide an extended window of 4 years, allowing taxpayers more time to correct or revise their filings.

6. TDS and TCS Rationalization: 

   The new rules will simplify compliance by increasing the thresholds for rent and LRS (Liberalized Remittance Scheme) remittances.

7. TCS Removal on Education Loans: 

   The removal of TCS on education loans up to ₹10 lakh will provide significant relief for families investing in higher education.

8. NPS Vatsalya Contributions: 

   Contributions made to NPS Vatsalya accounts will now receive the same tax benefits as other NPS contributions under Section 80CCD(1B) of the Income-tax Act, 1961.

Income Tax Slab Rates under New and Old Tax Regime for FY 2025-26 (AY 2026-27)

Comprehensive List of Income Tax Slab/Brackets Applicable for FY 2025-26

Taxpayers are divided into 4 categories and 1 for domestic companies when it comes to paying taxes according to the income tax slab. Let us take a look at these categories:

• Individuals less than 60 years old and Hindu Undivided Family (HUF), including Association of Persons (AOP), Body of Individuals (BOI), and Artificial Juridical Person

• Senior citizen with an age limit of 60 years and above but less than 80 years old

• Senior citizen who is 80 years or above

• Domestic companies

The government of India imposes income tax on the income earned by individuals and businesses. One must file an Income Tax Return (ITR) to justify their income from all sources. In this regard, it is crucial to understand the income tax slab for the fiscal year 2023-2024 to avail of the tax advantages to their fullest.

1. Income Tax Slab Rate for Individuals below 60 Years Old, Hindu Undivided Family (HUF) and Other Artificial Juridical Person – Part (I)

   Old Tax Regime for FY 2025-26 (AY 2026-27)		New Tax Regime for FY 2025-26 (AY 2026-27)
   Income Slab (in Rs.)	General Citizen	Tax Slab for FY 2025-26	Tax Slab
   ₹0 - ₹2,50,000	No Tax	0 - ₹4,00,000	No Tax
   ₹2,50,001 - ₹3,00,000	5%	₹4,00,001 - ₹8,00,000	5%
   ₹3,00,000 - ₹5,00,000	5%	₹8,00,001 - ₹12,00,000	10%
   ₹5,00,001 - ₹10,00,000	20%	₹12,00,001 - ₹16,00,000	15%
   Above ₹10,00,000	30%	₹16,00,001 - ₹20,00,000	20%
   –	–	₹20,00,001 - ₹24,00,000	25%
   –	–	₹24,00,001 and Above	30%

   Additional Component – Surcharge

   • 10% surcharge is applicable in case the income of an individual is more than Rs. 50,00,000 and less than Rs. 1,00,00,000

   • 15% Surcharge is applicable in case the income of an individual is more than Rs. 1,00,00,000 and less than Rs. 2,00,00,000

   • 25% Surcharge is applicable in case the income of an individual is more than Rs. 2,00,00,000 and less than Rs. 5,00,00,000

   • 37% Surcharge is applicable in case the income of an individual is more than Rs. 5,00,00,000

   Note: The government has decided not to add an extra charge of either 25% or 37% on incomes under sections 111A, 112A and 115AD. The highest extra charge remains at 15%.

   Health and Education Cess

   A Health and education cess of 4% is applicable on the amount of tax calculated, inclusive of the surcharge.

2. Income Tax Slab Rate of Senior Citizens of age between 60 to 80 years – Part (II)

   Old Tax Regime for FY 2025-26 (AY 2026-27)		New Tax Regime for FY 2025-26 (AY 2026-27)
   Income Slab (in Rs.)	Senior Citizen (60 years or above)	Tax Slab for FY 2025-26	Tax Slab
   ₹0 - ₹2,50,000	No Tax	0 - ₹4,00,000	No Tax
   ₹2,50,001 - ₹3,00,000	No Tax	₹4,00,001 - ₹8,00,000	5%
   ₹3,00,000 - ₹5,00,000	5%	₹8,00,001 - ₹12,00,000	10%
   ₹5,00,001 - ₹10,00,000	20%	₹12,00,001 - ₹16,00,000	15%
   Above ₹10,00,000	30%	₹16,00,001 - ₹20,00,000	20%
   –	–	₹20,00,001 - ₹24,00,000	25%
   –	–	₹24,00,001 and Above	30%

   Additional Component – Surcharge:

   • 10% surcharge is applicable in case the income of an individual is more than Rs. 50,00,000 and less than Rs. 1,00,00,000

   • 15% Surcharge is applicable in case the income of an individual is more than Rs. 1,00,00,000 and less than Rs. 2,00,00,000

   • 25% Surcharge is applicable in case the income of an individual is more than Rs. 2,00,00,000 and less than Rs. 5,00,00,000

   • 37% Surcharge is applicable in case the income of an individual is more than Rs. 5,00,00,000

   Note: The government has decided not to add an extra charge of either 25% or 37% on incomes under sections 111A, 112A and 115AD. The highest extra charge remains at 15%.

   Health and Education Cess

   A Health and Education cess of 4% is applicable on the amount of tax calculated, inclusive of the surcharge.

3. Income Tax Slab Rate for Super Senior citizen of 80 years or more – Part (III)

   Old Tax Regime for FY 2025-26 (AY 2026-27)		New Tax Regime for FY 2025-26 (AY 2026-27)
   Income Slab (in Rs.)	Super Senior Citizen (80 years or above)	Tax Slab for FY 2025-26	Tax Slab
   ₹0 - ₹2,50,000	No Tax	0 - ₹4,00,000	No Tax
   ₹2,50,001 - ₹3,00,000	No Tax	₹4,00,001 - ₹8,00,000	5%
   ₹3,00,000 - ₹5,00,000	No Tax	₹8,00,001 - ₹12,00,000	10%
   ₹5,00,001 - ₹10,00,000	20%	₹12,00,001 - ₹16,00,000	15%
   Above ₹10,00,000	30%	₹16,00,001 - ₹20,00,000	20%
   –	–	₹20,00,001 - ₹24,00,000	25%
   –	–	₹24,00,001 and Above	30%

   Additional Component – Surcharge:

   • 10% surcharge is applicable in case the income of an individual is more than Rs. 50,00,000 and less than Rs. 1,00,00,000

   • 15% Surcharge is applicable in case the income of an individual is more than Rs. 1,00,00,000 and less than Rs. 2,00,00,000

   • 25% Surcharge is applicable in case the income of an individual is more than Rs. 2,00,00,000 and less than Rs. 5,00,00,000

   • 37% Surcharge is applicable in case the income of an individual is more than Rs. 5,00,00,000

   Health and Education Cess

   A Health and education cess of 4% is applicable on the amount of tax calculated, inclusive of the surcharge.

Income Tax Slab Rate for Domestic Companies

Applicable additional rates for these tax slabs are:

1. Cess: 4% of Corporate Tax

   • If the taxable income is more than Rs 1 crore but less than Rs. 10 crore, a surcharge of 7% of income tax is applicable.

   • If the taxable income is more than Rs. 10 crore, then a surcharge of 12% of income tax is applicable.

   • If Company opts for taxability u/s 115BAA or Section 115BAB, a surcharge of 10% of income tax is applicable.

2. Partnership Firms

   30% tax rate is applicable for any Partnership Firms & Limited Liability Partnership (LLP).

3. Additional Component

   The surcharge is applicable if the taxable income is more than Rs.1 crore, then a surcharge of 12% of income tax is applicable.

4. Health and Education Cess

   A Health and education cess of 4% is applicable on the amount of tax calculated, inclusive of the surcharge.

5. Local Authorities/Entity

   30% tax rate is applicable for local authorities.

Income Tax Slab Rate for Foreign Company/Entity

Additional Components

Income Tax Slab Rate for Co-operative Societies

Rural/Urban/Semi-Urban excluding Agricultural Societies and Self Help Group (SHG)

Additional Components

Income Tax Slab and Rates on Dividend

Starting from the Financial Year 2021-22, the dividend income exemption limit in India is set at Rs. 5,000. This implies that any dividend income received up to this threshold will not be subject to taxation. However, any dividend income received above this limit will be subject to income tax at the relevant rate.

Income tax Slab Rate for NRI Under Old and New Tax Regime for FY 2025-26 (AY 2026-27)

For the financial year 2025-26, the income tax slab rates are as follows:

Health and Education Cess:

A Health and education cess of 4% is applicable on the amount of tax calculated, inclusive of the surcharge.

Income tax Slab Rate for Expats

For the financial year 2025-26, the income tax slab rates are the following:

Income tax Slab Rate for Freelancers

For the financial year 2025-26, the income tax slab rates are the following:

Income Tax Slab Rate for Doctors

For the financial year 2025-26, the income tax slab rates are the following:

Health and Education Cess:

A Health and education cess of 4% is applicable on the amount of tax calculated, inclusive of the surcharge.

Income Tax Act, 1961

The Income Tax Act 1961 consists of the IT provisions that apply uniformly to the whole of India and have been in effect since 1962. The Act contains different provisions to determine tax based on parameters like existing liability, income, and current tax slab rate.

1. Key Factors

   Income tax is based on the following key factors:

   • Resident status of the assessee

   • Income of assessee

   • Rate of tax

   • Assessment year

   • Gross income

   • Charge of Income Tax

2. Income Tax Eligibility

   • Hindu Undivided Family (HUF)

   • Salaried individual

   • Firm/Company

   • Local authority

   • Body of individuals (BOI) or Association of Persons (AOP), whether incorporated or not

Comparison of the Income Tax Slab Rates under New Tax Regime for the Last Three Years

Wrapping It Up! 

Income tax slab rates in India have undergone significant changes in recent years. By introducing recent changes with the Income Tax slabs for FY 2025-26, the government is trying to simplify the overall tax system for all individuals and businesses. 

These changes have brought a huge relief to taxpayers, especially salaried individuals. But to take the highest advantage of FY 2025-26 slabs, all individuals must stay updated and comply with tax laws.