https://prsindia.org/files/bills_acts/bills_parliament/2025/The_Income-tax_Bill,_2025.pdf
https://incometaxindia.gov.in/Pages/income-tax-bill-2025.aspx
https://www.referencer.in/Income_Tax/Income_Tax_Rates_AY_2025-26.aspx
India’s new income tax rules, effective from April 1, 2025 (Financial Year 2025-26), make the new tax regime the default option with an increased basic exemption limit and enhanced tax rebate. Taxpayers can still choose the old regime if it is more beneficial. [1, 2, 3, 4]
Key Changes in the New Tax Regime (FY 2025-26)
The primary goal of the changes is to make the new regime more attractive and simplify the tax structure.
- Default Regime: The new tax regime is now the automatic choice for filing Income Tax Returns unless a taxpayer explicitly opts for the old regime.
- Increased Basic Exemption Limit: The basic exemption limit (income that is completely tax-free) has been raised from ₹3 lakh to ₹4 lakh.
- Enhanced Tax Rebate: The tax rebate under Section 87A has been increased to ₹60,000 (previously ₹25,000). This means individuals with a taxable income up to ₹12 lakh effectively pay zero tax.
- Standard Deduction for Salaried Individuals: Salaried individuals can claim a standard deduction of ₹75,000 (increased from ₹50,000), making an annual salary up to ₹12.75 lakh effectively tax-free.
- Revised Tax Slabs: The income brackets have been expanded to provide relief to middle-income earners. [2, 3, 5, 6, 7]
| Income Slab (₹) [1, 3, 8, 9, 10] | Tax Rate (%) |
| Up to ₹4 lakh | Nil |
| ₹4 lakh to ₹8 lakh | 5% |
| ₹8 lakh to ₹12 lakh | 10% |
| ₹12 lakh to ₹16 lakh | 15% |
| ₹16 lakh to ₹20 lakh | 20% |
| ₹20 lakh to ₹24 lakh | 25% |
| Above ₹24 lakh | 30% |
Other Notable Updates
- TDS/TCS Thresholds: Limits for Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) on various transactions have been increased to reduce the compliance burden.
- ULIP Taxation: Maturity proceeds from Unit-Linked Insurance Plans (ULIPs) with annual premiums exceeding ₹2.5 lakh are now treated as capital gains and taxed accordingly.
- Updated Return Filing: The time limit for filing an updated income tax return (ITR-U) has been extended from two years to four years from the end of the relevant assessment year.
- New Income Tax Act 2025: A new, simplified Income Tax Act is in the works, intended to replace the 1961 Act and is expected to be effective from April 1, 2026, pending parliamentary approval. [3, 11, 12, 13]
Choosing Between Regimes
Taxpayers should compare their potential tax liability under both the new (fewer deductions, lower rates) and old (more deductions, higher rates) regimes to determine which is more beneficial for their specific financial situation. You can use the
Income Tax Department’s tax calculator
to compare.
AI responses may include mistakes.
[1] https://cleartax.in/s/income-tax-slabs
[2] https://www.bajajfinserv.in/investments/income-tax-slabs
[3] https://www.bajajfinserv.in/insights/income-tax-slab
[4] https://www.incometax.gov.in/iec/foportal/help/new-tax-vs-old-tax-regime-faqs
[5] https://www.pib.gov.in/PressReleasePage.aspx?PRID=2098406
[6] https://www.policybazaar.com/income-tax/save-tax-on-7-lakh/
[7] https://www.bajajfinserv.in/insights/income-tax-slab
[8] https://www.bajajfinserv.in/insights/income-tax-slab
[9] https://www.bajajfinserv.in/insights/income-tax-slab
[10] https://www.bajajfinserv.in/investments/income-tax-slabs
[11] https://groww.in/calculators/income-tax-calculator
[12] https://cleartax.in/s/income-tax-act-2025
[13] https://cleartax.in/s/income-tax-changes-from-april-2025
[15] https://www.jiraaf.com/blogs/taxation/how-to-save-income-tax-above-30-lakhs