Overview
The Union Budget 2025 revised the tax slabs under the new tax regime to provide relief to individual taxpayers. The changes apply from 1 April 2025 (FY 2025-26) - the return you file in AY 2026-27.
The new regime continues to offer a simplified structure with lower slab rates and a higher rebate under Section 87A, while most deductions (80C, 80D, HRA, etc.) are not available.
FY 2025-26 New Regime Slab Rates
| Income slab (₹) | 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% |
Standard Deduction
A standard deduction of ₹75,000 is available to salaried individuals and pensioners under the new regime (increased from ₹50,000 earlier). It is applied automatically - no proof or investment needed. Business and professional income gets no standard deduction.
Section 87A Rebate - Zero Tax up to ₹12 Lakh
If your total taxable income is up to ₹12,00,000, you can claim a rebate under Section 87A (up to ₹60,000) which reduces your tax liability to zero. For salaried individuals, this effectively makes a salary of up to ₹12.75 lakh tax-free, thanks to the ₹75,000 standard deduction.
(Section 87A rebate)
Just above ₹12 lakh, marginal relief caps your tax at the amount by which your income exceeds ₹12 lakh - so a ₹12.10 lakh taxable income pays ₹10,000 (+ cess), not the full slab tax of ₹61,500. The rebate applies to slab-rate tax only; tax on special-rate capital gains (STCG / LTCG on equity) is never covered. See exactly how this works →
Cess and Surcharge
A 4% Health & Education Cess is added to the tax (after rebate and surcharge) in every case. Surcharge applies only when total income exceeds ₹50 lakh: 10% between ₹50 lakh and ₹1 crore, 15% between ₹1 and ₹2 crore, and 25% above ₹2 crore - the new regime caps surcharge at 25% (the old regime goes to 37%). Marginal relief ensures the extra tax never exceeds the income above each threshold. The final figure is rounded to the nearest ₹10.
Worked Example
| Gross salary | ₹16,00,000 |
| Less: Standard deduction | ₹75,000 |
| Taxable income | ₹15,25,000 |
| Tax as per slabs (₹20,000 + ₹40,000 + ₹48,750) | ₹1,08,750 |
| Health & Education Cess (4%) | ₹4,350 |
| Total tax payable | ₹1,13,100 |
₹4-8L at 5% = ₹20,000 · ₹8-12L at 10% = ₹40,000 · ₹12-15.25L at 15% = ₹48,750. Full ₹16 lakh breakdown, monthly in-hand and break-even deduction →
Old vs New Regime
The old regime keeps the ₹2.5 lakh exemption, 5% / 20% / 30% slabs, a ₹50,000 standard deduction and the full menu of deductions (HRA, 80C, 80D, NPS, home-loan interest). It wins only when those deductions are large - typically a home loan plus rent plus a maxed 80C. For most salaried people at ₹12-25 lakh the new regime is cheaper. Compare both with the break-even rule → or run your own numbers.
Key Takeaways
- Higher basic exemption limit (₹4 lakh)
- Simplified slab structure with lower rates
- Zero tax up to ₹12 lakh (with Section 87A)
- Most deductions (80C, 80D, HRA etc.) not available
- Standard deduction increased to ₹75,000
- Ideal for those with fewer deductions