Income Tax Slabs and Rates - FY 2025-26, AY 2026-27

As mentioned earlier, the Union Budget 2025 announcement has retained the income tax slab rates of FY 2024-25 for the old tax regime. So, the income tax slab rates under old tax regime for salaried and self-employed individuals up to 60 years of age in FY 2025-26 will look like this:

The above old tax regime slabs and rates are also applicable to Hindu Undivided Family (HUF) taxpayers as well as other non-individual tax payers such as Association of Persons (AoP), Body of Individuals (BoI), etc. for AY 2026-27.

The new tax regime slabs and rates are applicable to all individual tax payers irrespective of their age. However, individual tax payers aged 60 years to less than 80 years are designated as senior citizens and they get a higher exemption limit under the old tax regime. The below table illustrates the income tax slabs and rates under the old tax regime for senior citizen tax payers in AY 2026-27:

As the income tax slabs have remained unchanged in FY 2025-26, the old tax regime will continue to provide a higher exemption limit to super senior citizen taxpayers i.e. individuals aged 80 years or more. The below table illustrates the old tax regime slab rates applicable to super senior citizen tax payers aged 80 years or more in AY 2026-27:

Hindu Undivided Family (HUF) tax payers have to income tax based on the same slab rates as individuals aged under 60 years. Additionally, HUF can also opt for the new tax regime and the updated new tax regime slab rates for FY 25-26. Below table illustrates the income tax slab rates for HUF tax payers in AY 26-27 under the old and new tax regime:

As you can see, the new tax regime offer HUF tax payers a higher exemption limit as well as lower slab rates as compared to the old tax regime in Assessment Year 2026-27.

Non-Resident Indians who have income within India whether through rental or other means have to pay tax on this income. From a personal income tax perspective, NRIs have to pay income tax as per the same slab rate as resident Indians as per the tax regime chosen.

So, income tax slabs and rates under new and old tax regime for AY 26-27 in the case of NRIs aged up to 60 years looks like this:

Similarly, in the case of senior citizen NRIs aged 60 years and less than 80 years, the applicable income tax slab rates in AY 2026-27 are as follows:

As you can see, senior citizen NRIs opting for the old tax regime get the benefit of a higher exemption limit compared to the new tax regime. However, the total tax payable may be lower for those with higher income due to the lower tax rates and a higher number of slabs.

Super senior NRIs are non-resident Indians who are aged 80 years or more and they are offered a higher exemption limit of ₹5 lakh if they opt for the old tax regime. The slab and rates under the new tax regime however remain unchanged for all NRI tax payers irrespective of age. Below table illustrates the income tax slabs and applicable rates under the new as well as old tax regime for super senior NRIs:

While super senior citizen NRIs with annual income up to ₹5 lakh are exempt from paying income tax under the old tax regime, the slab rates are lower if they opt for the new tax regime.

Apart for the new income tax slab rates under the new tax regime, the Union Budget 2025 further sweetened the deal with the announcement of net zero tax for annual net taxable income up to Rs. 12 lakh. This has been achieved through an amendment in the existing provision under Section 87A.

Prior to Budget 2025 announcement, Section 87A offered a 100% tax rebate on income up to Rs. 20,000 for those with net taxable income of up to Rs. 7 lakh in FY 2024-25, if one has opted for the new tax regime. This limit has now been increased for FY 2025-26. So, individual tax payers who opt for the new tax regime and have annual taxable income of up to Rs. 12 lakh will be eligible for 100% tax rebate up to Rs. 60,000.

This is even better news for salaried individuals and pensioners who opt for the new tax regime. Such individuals are eligible for a standard deduction of Rs. 75,000 annually. So, with introduction of the new zero net tax threshold limit, such individuals will effective not have to pay any income tax on net taxable income up to Rs. 12.75 lakh in AY 2026-27.

Domestic Companies have to pay income tax at different rates as compared to individual tax payers in India. Based on turnover, the below table illustrates the income tax rates applicable to domestic companies for AY 26-27:

Additionally, the income tax for domestic company calculated based on the above rates is subject to surcharge at the following rates, with marginal relief, if applicable. Below is the surcharge on income tax for domestic companies in India for FY 25-26:

Domestic companies may also be eligible for payment via the minimum alternate tax (MAT) mechanism. In case of eligible companies, the MAT is charged at the rate of 15% on Book Profit of the company.

Apart from the above income tax rate, some domestic companies are also eligible to pay income tax at special rates in India. The special income tax rates applicable to different types of domestic companies for FY 25-26 (AY 26-27) are as follows:

Note: MAT is not applicable to companies who have opted for Section 115BAA and Section 115BAB. The above tax rate are exclusive of surcharge as well as health and education cess.

In the case of Partnership Firms including Limited Liability Partnership (LLP), the income tax rate is flat 30% irrespective of the annual income. The income tax thus calculated is also subject to surcharge (with marginal relief, if applicable) at the rate of 12% if the total annual income exceeds ₹1 crore.

Foreign companies operating in India are liable to pay income tax at different rates based on their source of income. Below table shows the applicable income tax rates for foreign companies for AY 26-27:

Note: The income tax of foreign companies calculated using the above income tax rate is subject to surcharge (with marginal relief, if applicable) at the rate of 2%, if annual income is more than ₹1 crore but less than ₹10 crore. A higher surcharge rate of 10% is applicable on income over ₹10 crore, subject to marginal relief, if applicable.

In case a foreign company is eligible for minimum alternate tax (MAT), the applicable tax rate is 15% of annual book profit of the foreign company.

As you have already observed, the new tax regime and old tax regime differ significantly in terms of the number of slabs as well as the income tax rates that are applicable. But the differences are limited to these only.

The below table illustrates some of the other key differences between the new tax regime and old tax regime in FY 2025-26 / AY 2026-27:

As you can see, several differences exist between the new tax regime and old tax regime beyond just the number of income tax slabs and corresponding rates that are applicable.

Which regime will work better for you will depend on multiple factors including your annual income and the extent to which you are able to claim deduction. In the following section, we will illustrate how the income tax payable varies under the old vs new tax regime for different income levels.

As already mentioned, the income of the tax payer, the choice of tax regime and applicable deduction plays a key role in determining how much you tax liability will be. The below table shows the tax payable for individual tax payers aged less than 60 years with different income excluding cess and surcharge for AY 2026-27:

Note: The above calculations have been made assuming deduction of ₹2 lakh under old tax regime. This includes 1.5 lakh deduction for various Section 80C investment options and 50,000 u/s 80CCD(1B) for National Pension System self-contribution. Since these benefits are not available under the new tax regime, corresponding deduction under new tax regime have been assumed as Nil. Standard Deduction under old tax regime has been assumed as ₹50,000 and ₹75,000 under the new tax regime.

As you can from above, even without deductions, the new tax regime has emerged as the clear choice due to its lower tax liability in the sample calculations for FY 25-26 done above.

However, do note these calculations are not exhaustive. So, please check your own tax liability under both regimes using an online income tax calculator or seek the help of a tax professional before making a decision.

Due to the differences in slab rates for different categories of tax payers as well as the differences between tax regimes, the implications regarding income tax payable can differ significantly. Below are some key tax implications to consider for different categories of tax payers in India:

The new tax regime while offering lower income tax slab rates and a higher number of slabs, features one key drawback – a number of popular tax deductions and exemptions are not available. Some of the key deductions that are available under the old tax regime, but not under the new tax regime include:

• Section 80C: This section offers tax deduction of up to ₹1.5 lakh annually for various investments and expenses.Section 80C investment options include premium payments for life insurance policies such as term insurance plans and Unit Linked Insurance Plans, investments made in PPF, ELSS mutual funds, etc.
• Section 80CCD (1B): Under this subsection of Section 80C, self-contributions made towards the National Pension System are eligible for tax deduction. The maximum deduction applicable under this Section 80CCD sub-section is up to ₹50,000, which is over and above the ₹1.5 lakh allowed under Section 80C.
• Section 80D: This benefit can be up to ₹1 lakh annually. Section 80D benefit is applicable on premium payments made towards health insurance and mediclaim policies for self, family and dependent parents.
• Section 80E: This is the tax benefit applicable on the repayment of the interest of an education loan. Section 80E is applicable to the interest repayment only. The principal repayment of an education loan however does not any tax benefit under the old or new tax regime.
• Section 80G: Under the old tax regime, payments made to various charities and religious organisations are eligible for tax deduction benefits. Section 80G deduction is currently not available under the new tax regime.
• Section 80U: This benefit is applicable to a taxpayer with disabilities. The maximum benefit under this section is ₹1.25 lakh in a fiscal that can be claimed by taxpayer with severe disability.
• Section 24(b): This section of the Income Tax Act offers tax deduction benefits applicable on repayment of the interest accrued on a home loan. The maximum annual limit for this home loan tax benefit is ₹2 lakh.

The above list of deductions available under the old tax regime but not under the new tax regime are illustrative. This is not an exhaustive list as there are many more deductions that are only available to those opting for the old tax regime instead of the new regime.

As mentioned earlier, the new tax regime offers relatively fewer deductions. Below are some key deductions under the new tax regime for AY 2026-27:

• Standard Deduction for Salaried and Pensioners: This benefit can be availed by salaried individuals and pensioners under the new tax regime. In FY 2025-26, this benefit is fixed at ₹75,000 under the new tax regime irrespective of the income of the eligible taxpayer.
• Standard Deduction on Rental Income: This benefit can only be availed by individuals who receive rental income from let out property. Up to 30% of the annual rental income can be claimed as standard deduction under the new tax regime.
• Section 80 CCD(2): Contributions made by employers towards a pension plan such as the National Pension System are eligible for tax benefits under this section of the Income Tax Act, 1961. The maximum benefit allowed under this Section 80CCD sub-section is up to 14% of the basic salary of the subscriber
• Allowances and Perquisites: Allowances and perquisites offered to salaried individuals include communication allowance, car lease scheme, transport allowance, conveyance allowance, etc. These can offer tax deduction benefit under both the old and the new tax regime.

The above list of tax deductions offered under the new tax regime are illustrative only and not exhaustive.

The below table provides an overview regarding the availability of some popular deductions and exemptions under the old tax regime versus the new tax regime:

Note: The list of exemptions and deductions mentioned above are illustrative and not an exhaustive list.

ncome Tax is progressive in nature, which means that higher income tax slab rates are applicable to individuals with higher income. One common way to reduce taxable income and overall tax liability is to maximise tax saving investments.

However, the new tax regime offers relatively fewer avenues for tax savings in this regard. Still, there are a few different ways you can reduce your income tax outgo even if you have opted for the new tax regime:

The new income tax slabs and rates offered under the new tax regime in FY 25-26 offer the benefit of a lower tax liability compared to the old tax regime in many cases.

The below table quantifies the tax savings offered under the new tax regime versus the old tax regime for different incomes based on the income tax slab rates for AY 2026-27:

Note: The above calculations have been based on the following assumptions:

• Standard Deduction of 50,000 under old tax regime and 75,000 under the new tax regime
• No tax deductible investments were considered under either tax regime
• The tax payable and tax savings are before applicable cess and surcharge
• Section 87A Deduction applicable on income up to 5 lakh under old tax regime and up to 12 lakh under the new tax regime.

Surcharge on income tax in FY 2025-26 is applicable on the income tax (calculated as per income tax slab rates) by individuals who have income higher than ₹50 lakh in the fiscal.

The below table illustrates the surcharge rate applicable for individual taxpayers with different income levels under the new tax regime and old tax regime in AY 2026-27:

As you can see, the rate of surcharge on income tax stays the same under both the new tax regime and old tax regime up to income of ₹5 crore. However, the surcharge rate is higher at 37% for individuals opting for the old tax regime who have annual taxable income exceeding ₹5 crore. The maximum rate of surcharge on income tax is capped at 25% for individuals opting for the new tax regime in AY 26-27.

Surcharge on income tax is also applicable to domestic and foreign companies who have earned income in India during FY 25-26. The below table illustrates the different surcharge rates applicable for domestic companies with income in India:

Note: Companies opting for taxation under Section 115 BAA and Section 115 BAB do not get any relief on surcharge. So, they are required pay surcharge at the flat rate of 10% irrespective of their annual income.

Foreign companies are also liable to surcharge on income tax at different rates in FY 25-26 as per below:

As you can see foreign companies are not required to pay surcharge on income tax if their net taxable income for FY 25-26 is less than or equal to ₹1 crore.

Health & Education Cess is an additional levy that is charged by the Central Government on top of the basic tax liability payable by a tax payer as per the income tax slab rate. In FY 25-26, health and education cess is payable at 4% by any individual who has a tax liability. The rate of cess on income tax is currently the same for taxpayers irrespective of the tax regime chosen.

Let’s understand the calculation of health and education cess on income tax with an example:

Suppose the tax liability of an individual as per the income tax slab rate in FY 26-27 is ₹28,000.

So, Health and education cess at 4% on ₹28,000 = ₹1120

Thus, total tax liability of the individual including Health and Education Cess for FY 26-27 will be ₹29,120.

Since its introduction, the new tax regime has undergone multiple updates, while the old tax regime has remained nearly unchanged during the same period. If you are still on the fence regarding which tax regime is more suitable for your need, take a look at the key benefits and drawbacks of the new tax regime in FY 25-26.

Knowing your income tax liability is crucial for planning not just which tax regime to choose, but also to figure out other related aspects such as self-assessment tax payment, advance tax payments and more.

Below are the key steps to calculate your tax liability based on the income tax slabs and rates for AY 2026-27 i.e. FY 25-26:

As a result of the new income tax slabs and rates applicable under the new tax regime, below are some key benefits that taxpayers from different walks of life are expected to receive:

The Budget 2025 announcement has seemingly made the new tax regime even more lucrative with higher net tax limit and lower slab rates for eligible tax payers. However, one should keep in mind that traditional tax saving expenses and investments such as life insurance premiums, Unit Linked Insurance Plan investments, ELSS investments, Public Provident Fund investments, etc. are not eligible for tax benefits if one opts for the new tax regime. So, tax payers should definitely crunch the numbers and, if required, seek the help of a tax professional to figure out which tax regime is better suited to their needs.