New Income Tax Slabs for India 2025
New Income Tax Slabs for India 2025: A Detailed Analysis and Comparison with 2024
The Union Budget 2025 has introduced significant changes to India’s income tax slabs, aiming to provide relief to taxpayers and encourage economic growth. These changes mark a step toward a simplified tax system, ensuring a more progressive structure that benefits middle-class and lower-income individuals. In this blog, we will break down the new tax slabs for the financial year (FY) 2025-26 (assessment year 2026-27), compare them with the previous year’s tax structure, and analyze their impact on taxpayers.
New Income Tax Slabs for FY 2025-26 (AY 2026-27)
The revised tax slabs under the new tax regime are as follows:
Income up to ₹4,00,000 – No tax (Nil)
Income from ₹4,00,001 to ₹8,00,000 – 5%
Income from ₹8,00,001 to ₹12,00,000 – 10%
Income from ₹12,00,001 to ₹16,00,000 – 15%
Income from ₹16,00,001 to ₹20,00,000 – 20%
Income from ₹20,00,001 to ₹24,00,000 – 25%
Income above ₹24,00,000 – 30%
Key Highlights of the New Tax Regime:
Increase in tax-free income threshold: The basic exemption limit has been increased from ₹3,00,000 to ₹4,00,000, providing relief to lower-income groups.
Revised tax brackets: The introduction of a 25% tax slab for income between ₹20,00,001 and ₹24,00,000 ensures a more gradual taxation structure.
Higher standard deduction: Salaried individuals will benefit from an increased standard deduction of ₹75,000 (up from ₹50,000), reducing taxable income.
Comparison with the Previous Year’s Tax Slabs (FY 2024-25)
To understand how the changes affect taxpayers, let’s compare the new tax slabs with the previous year’s tax structure:
Income Tax Slabs for FY 2024-25 (AY 2025-26)
Income up to ₹3,00,000 – No tax (Nil)
Income from ₹3,00,001 to ₹6,00,000 – 5%
Income from ₹6,00,001 to ₹9,00,000 – 10%
Income from ₹9,00,001 to ₹12,00,000 – 15%
Income from ₹12,00,001 to ₹15,00,000 – 20%
Income above ₹15,00,000 – 30%
Major Differences Between FY 2025-26 and FY 2024-25
Increase in Tax Exemption Limit: The tax-free income threshold has been increased from ₹3,00,000 to ₹4,00,000, reducing tax liability for low-income earners.
Introduction of a 25% Tax Slab: A new 25% tax bracket for income between ₹20,00,001 and ₹24,00,000 has been introduced, creating a more gradual increase in tax rates.
Expansion of Income Ranges: Tax slabs have been modified to cover broader income ranges, reducing the burden for middle-class taxpayers.
Higher Standard Deduction: Salaried individuals now enjoy a higher standard deduction of ₹75,000 compared to ₹50,000 in the previous year, further lowering taxable income.
Impact of the New Tax Slabs on Taxpayers
1. Relief for Lower-Income Earners:
The increase in the tax-free threshold to ₹4,00,000 provides direct benefits to individuals in the lower-income bracket, ensuring more disposable income.
2. More Savings for Middle-Class Taxpayers:
The revised slabs reduce the tax burden on individuals earning up to ₹12,75,000, especially with the increase in the standard deduction. This encourages savings and boosts spending capacity, benefiting the economy.
3. Higher Tax for Higher Income Groups:
While the tax rate for income above ₹24,00,000 remains at 30%, the introduction of the 25% slab for income between ₹20,00,001 and ₹24,00,000 ensures that higher earners contribute more in taxes in a gradual manner.
4. Economic Growth and Consumption Boost:
With increased disposable income, especially for the middle class, consumer spending is expected to rise, contributing to economic growth and increased demand for goods and services.
Should You Choose the New Tax Regime?
With these tax slab revisions, many taxpayers may find the new regime more beneficial, especially those who do not claim multiple deductions under the old regime. Here’s a quick guide to help you decide:
Choose the new tax regime if: You have fewer deductions and exemptions, and your income falls within the middle-class category where lower tax rates apply.
Stick to the old tax regime if: You claim significant deductions on housing loans, insurance, investments (PPF, ELSS), and medical expenses that reduce your taxable income significantly.
The Union Budget 2025’s revised income tax slabs aim to create a more taxpayer-friendly and progressive tax structure. The increased exemption limit, revised tax brackets, and higher standard deduction ensure that lower and middle-income earners retain more of their income, ultimately driving economic growth. Taxpayers should carefully assess these changes and plan their finances accordingly to maximize benefits.
Are you wondering how these tax changes impact your specific financial situation? Use an online tax calculator or consult a financial advisor to make informed decisions.
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Also read: Union Budget 2025-26 Comprehensive Analysis
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