The Indian government has introduced a revised income tax regime for the Financial Year (FY) 2025-26 (Assessment Year 2026-27), simplifying tax calculations and benefiting salaried employees. This blog provides an in-depth look at the new tax slabs, TDS (Tax Deducted at Source) provisions, and an illustrative salary tax calculation to help taxpayers understand their liabilities.
New Income Tax Slabs for FY 2025-26
Under the new regime, the income tax slabs have been updated as follows:
| Income Slab (₹) | Tax Rate (%) |
| 0-400000 | 0 |
| 4,00001-8,00000 | 5 |
| 8,00001-12,00000 | 10 |
| 12,00001-16,00000 | 15 |
| 16,00001-20,00000 | 20 |
| 20,00001-24,00000 | 25 |
| 240,0001 – above | 30 |
Additionally, standard deduction of ₹75,000 is applicable to salaried employees, effectively reducing their taxable income.
TDS Provisions under the New Regime
TDS on salary is deducted based on the employee’s annual taxable income as per the revised slabs. Employers consider whether the employee has opted for the new or old tax regime before calculating TDS.
Key Changes in TDS for FY 2025-26:
- Higher Exemption Limit: Individuals earning up to ₹4,00,000 will not be liable for tax, reducing the number of taxpayers.
- Section 87A Rebate: For incomes up to ₹12,00,000, a rebate of up to ₹60,000 is available, effectively bringing the tax liability to zero for such individuals.
- Updated Deduction on Rent Payments: The threshold for TDS deduction on rental payments has increased to ₹6 lakh annually.
TDS Calculation Example for a Salaried:
Let’s consider an example to understand how tax is calculated under the new tax regime (2025 -26).
Example:
Employee Name: Raju
Gross Annual Salary: ₹15,00,000
Standard Deduction: ₹75,000
Net Taxable Income: ₹15,00,000 – ₹75,000 = ₹14,25,000
Now, applying the revised tax slabs:
| Income Slab (₹) | Tax Rate (%) | Tax Amount (₹) |
| 0 – 4,00,000 | 0% | 0 |
| 4,00,001 – 8,00,000 | 5% | 20,000 |
| 8,00,001 – 12,00,000 | 10% | 40,000 |
| 12,00,001 – 14,25,000 | 15% | 33,750 |
Total Tax Before Rebate: ₹20,000 + ₹40,000 + ₹33,750 = ₹93,750
Since Raju’s taxable income exceeds ₹12,00,000, he does not qualify for the ₹60,000 rebate under Section 87A.
Final Tax Calculation:
Total Tax: ₹93,750
Health & Education Cess (4%): ₹3,750
Total Tax Liability: ₹97,500
Monthly TDS Installment: ₹ 8,125
Thus, Raju’s total tax payable for FY 2025-26 will be ₹97,500, deducted by the employer in monthly TDS installments.
Annual Tax Payable = ₹97,500
Monthly TDS Deduction = ₹97,500 ÷ 12 = ₹8,125 per month.
Previous New Tax Regime (FY 2024-25)
| Income Slab (₹) | Tax Rate | |
| 0 | 3,00,000 | 0% |
| 3,00,001 | 6,00,000 | 5% |
| 6,00,001 | 9,00,000 | 10% |
| 9,00,001 | 12,00,000 | 15% |
| 12,00,001 | 15,00,000 | 20% |
| Above 1500000 | 30% | |
Tax Calculation Under Previous New Tax Regime (FY 2024-25)
- Up to ₹3,00,000 → 0% → ₹0
- ₹3,00,001 to ₹6,00,000 → 5% on ₹3,00,000 = ₹15,000
- ₹6,00,001 to ₹9,00,000 → 10% on ₹3,00,000 = ₹30,000
- ₹9,00,001 to ₹12,00,000 → 15% on ₹3,00,000 = ₹45,000
- ₹12,00,001 to ₹14,25,000 → 20% on ₹2,25,000 = ₹45,000
Total Tax Before Cess = ₹15,000 + ₹30,000 + ₹45,000 + ₹45,000 = ₹1,35,000
Health & Education Cess (4%) = ₹5,400
Total Tax Payable (FY 2024-25) = ₹1,40,400
Final Tax Comparison (FY 2024-25 vs. FY 2025-26)
| Tax Component | FY 2024-25 | FY 2025-26 |
| Gross Salary | ₹15,00,000 | ₹15,00,000 |
| Standard Deduction | ₹50,000 | ₹75,000 |
| Net Taxable Income | ₹14,50,000 | ₹14,25,000 |
| Tax Before Cess | ₹1,35,000 | ₹93,750 |
| Cess (4%) | ₹5,400 | ₹3,750 |
| Total Tax Payable | ₹1,40,400 | ₹97,500 |
| Tax Savings in New Regime | – | ₹42,900 |
Key Differences Between FY 2024-25 and FY 2025-26
- Higher Exemption Limit: The tax-free income threshold has increased from ₹3,00,000 to ₹4,00,000.
- Wider Tax Brackets: The income slab ranges for 5%, 10%, and 15% tax brackets have been expanded.
- New 25% Slab Introduced: The ₹20,00,001 – ₹24,00,000 range is now taxed at 25%, whereas in the old regime, income above ₹15,00,000 was directly taxed at 30%.
- Rebate under Section 87A remains available for taxable incomes up to ₹12,00,000.
Conclusion: Which Regime is Better?
The revised Income Tax slabs for FY 2025-26 aim to simplify tax calculation and benefit salaried employees. With the increased standard deduction and Section 87A rebate, many individuals will see reduced tax liabilities. Taxpayers should carefully analyze their financial situation and choose the most beneficial tax regime.
With the new tax regime for FY 2025-26, the tax burden is significantly reduced. The key benefits include:
✅ Higher exemption limit (₹4,00,000 vs. ₹3,00,000)
✅ Lower tax rates for middle-income groups
✅ Wider slabs for 5%, 10%, and 15% tax brackets
✅ Higher standard deduction (₹75,000 vs. ₹50,000)
For a salaried individual earning ₹15,00,000, the new tax regime (FY 2025-26) saves ₹42,900 in tax compared to the previous year.
Which regime is better for you?
If you claim multiple deductions (HRA, 80C, 80D), the old tax regime may still be beneficial. However, for employees with minimal exemptions, the new tax regime is more tax-efficient.S
Source
https://www.bajajfinserv.in/investments/income-tax-slabs?
https://www.bankbazaar.com/tax/income-tax-slabs.html?