Income Tax 2025-2026: How It Impacts You
The 8th Union Budget of India under the 3rd time Modi Government was announced on Feb 1, 2025, by the Hon'ble Finance Minister: Mrs. Nirmala Sitharaman and it's all over the news. This budget has without a doubt captured headlines across the nation.
INCOME TAX 2025-56
Income Tax Slabs Under the New Regime:
Key Income Tax Announcements:
Maximum Tax Savings:
Look at this example of how much tax a salaried person with a salary of ₹15,00,000 saves under the New Tax Regime.
Financial Year 2024-25 (Assessment Year 2025-26)
| Annual Income Tax Slab (₹) | Tax Rate (%) | Tax Amount(₹) |
|---|---|---|
| Up to ₹3,00,000 | Nil | 0 |
| 3,00,001 - 7,00,000 | 5% | 20,000 |
| 7,00,001 - 10,00,000 | 10% | 30,000 |
| 10,00,001 - 12,00,000 | 15% | 30,000 |
| 12,00,001 - 15,00,000 | 20% | 60,000 |
| Total Tax Before Deduction | - | 1,40,000 |
| Standard Deduction | ₹75,000 | Applied |
| Taxable Income After Deduction | ₹14,25,000 | - |
| Revised Tax Payable | - | ₹1,25,000 |
Financial Year 2025-26 (Assessment Year 2026-27)
| Annual Income Tax Slab (₹) | Tax Rate (%) | Tax Amount(₹) |
|---|---|---|
| Up to ₹4,00,000 | Nil | 0 |
| 4,00,001 - 8,00,000 | 5% | 20,000 |
| 8,00,001 - 12,00,000 | 10% | 40,000 |
| 12,00,001 - 15,00,000 | 15% | 45,000 |
| Total Tax Before Deduction | - | 1,05,000 |
| Standard Deduction | ₹75,000 | Applied |
| Taxable Income After Deduction | ₹14,25,000 | - |
| Revised Tax Payable | - | ₹93,750 |
| Financial Year | Tax Payable (₹) | Tax Savings Compared to Previous Year (₹) |
|---|---|---|
| 2024-25 | 1,25,000 | - |
| 2025-26 | 93,750 | 31,250 |
Rebate:
- Under the new regime, individuals earning Rs 12 lakh or less are eligible for a rebate, granting them full tax exemption. Conversely, for those earning slightly above Rs 12 lakh, marginal relief is available to ensure that the tax burden is in line with their income.
Encouraging New Tax Regime Adoption:
- The revised tax slabs are made to encourage wider adoption of the new tax regime. The government’s intent is clear: to ease the tax burden for both taxpayers and authorities.
Tax-Free Income Limit:
- Taxpayers with a net taxable income of Rs 12 lakh will now pay nil tax because of the enhanced tax rebate proposed in Budget 2025. This is a significant relief for the lower and middle-income groups.
- This means that individuals earning ₹12 lakh annually will now save ₹80,000 in taxes.
- Those who were earning ₹25 lakh will save as much as ₹1.1 lakh—equivalent to 25% of their previous tax liability.
Income Tax Calculator - Calculate Your Taxes for FY 2025-26 | Use Tax Calculator Online
Income Tax Calculator - How to calculate Income taxes online? for FY 2024-25 (AY 2025-26 ) and FY 2025-26 (AY 2026-27 )and with ClearTax Income Tax Calculator. Refer examples and tax slabs for easy calculation.
Calculate your tax liability here!
Impact on Old Tax Regime:
- For those opting for the old tax regime, the minimum deductions/exemptions required to match the tax payable under the new regime will be higher. This means that taxpayers will need to claim deductions totaling up to Rs 8.5 lakh to avoid paying more tax under the old regime.
If you have trouble understanding the Budget, here's a video that might help:
Budget 2025 - in easier terms.
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