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New Tax Regime 2025: Updated Tax Slabs, Rates, Highlights
Introduction The Indian government has revised the income tax slabs under the new tax regime for the financial year (FY) 2024-25 and assessment year (AY) 2025-26. The updated slabs were announced in Budget 2025, bringing significant changes to income tax rates and rebates. These changes aim to simplify tax compliance and reduce the burden on middle-class taxpayers.
Under the new tax regime, there are no exemptions or deductions, but lower tax rates have been introduced. One of the biggest highlights of Budget 2025 is that individuals earning up to Rs. 12 lakhs will not have to pay income tax due to the enhanced rebate.
Revised Income Tax Slabs for FY 2025-26 (AY 2026-27)
The new tax regime slabs for FY 2025-26 (AY 2026-27) are as follows:
| Income Slab (Rs.) | Tax Rate |
|---|---|
| Up to 4,00,000 | NIL |
| 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% |
| Above 24,00,000 | 30% |
Key Highlights of the New Tax Regime in Budget 2025
- No tax for income up to Rs. 12 lakhs: The rebate has been increased to Rs. 60,000, ensuring that individuals earning up to Rs. 12 lakhs do not pay any tax.
- Reduced tax rates: The new tax regime continues to offer lower tax rates without deductions, making it attractive for those who do not claim exemptions.
- Direct Tax Code Announcement: The government is set to present a new Direct Tax Code in Parliament next week to simplify taxation further.
Comparison: New vs. Old Tax Regime
The old tax regime allows exemptions such as HRA, 80C, 80D, home loan interest deductions, etc. However, the new regime offers lower tax rates without these exemptions. Taxpayers must carefully evaluate which regime suits them best.
Conclusion
The changes in the new tax regime for FY 2025-26 (AY 2026-27) provide tax relief to middle-income earners while ensuring a simplified tax structure. Taxpayers must assess their financial situation to choose between the new and old regimes. With the upcoming Direct Tax Code, further simplifications and reforms can be expected in India’s taxation system.
For detailed tax calculations and updates, stay tuned to our website for the latest financial insights and government policy changes.
