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Budget 2025: Here are the income tax rates, standard deduction available, basic exemption limit, rebate and deductions under both the new and old tax regimes.
Income Tax Slabs Union Budget 2025.
The Union Budget 2025-26 has rejigged the new tax regime (NTR) in order to provide relief to the middle class worth Rs 1 lakh crore, while maintaining the status quo on the old tax regime (OTR). The Budget has exempted income tax on annual income up to Rs 12 lakh (from Rs 7 lakh earlier) benefitting over one crore taxpayers in the country and has reduced tax burden from others. It has been done by hiking the rebate and revamping slabs. However, the standard deduction and other deductions have remained unchanged. Here are the latest income tax rates, standard deduction available, basic exemption limit, rebate and deductions under both the new and old tax regimes.
Budget 2025: Basic Exemption Limit Under New Vs Old Regime
Basic tax exemptions are specific portions of your income excluded from taxation, and no tax is levied on that irrespective of the taxpayer’s income level.
The Budget 2025-26 has enhanced the basic exemption limit under the new tax regime from Rs 3 lakh to Rs 4 lakh, while keeping it unchanged for the old regime at Rs 2.5 lakh. However, for senior citizens aged 60-80 years, the basic exemption limit under the OTR is Rs 3,00,000. For super senior citizens (above 80 years), it is Rs 5,00,000.
Standard Deduction Limit: New Vs Old Regime
Standard deduction limit is a fixed amount set by the government which is deducted flat from the taxpayer’s income to levy tax on the rest of the income.
The Budget 2025 has kept the standard deduction limit unchanged at Rs 75,000 and 50,000 for new tax regime and old tax regime, respectively.
How It Works: Suppose, a person earns Rs 12,75,000 in a year. So, under the new regime, Rs 75,000 will be deducted from the income of Rs 12,75,000, and the remaining amount (Rs 12,00,000) will be considered for the tax calculation. Similar takes place under the old regime where Rs 50,000 standard deduction is available.
Rebate: New Tax Regime Vs Old Tax Regime
The tax rebate is different from exemption. Under the rebate, an income limit is fixed up to which the income becomes tax-free under Section 87A of the Income Tax Act, 1961. However, if the annual income exceeds the limit, tax on whole income tax is to be paid.
In simple terms, it’s a discount on tax for specific taxpayers.
In Budget 2025-26, the rebate under new tax regime has been increased to Rs 60,000 (from Rs 25,000 earlier) for the total income limit up to of Rs 12,00,000 (from Rs 7,00,000 earlier). Under the old tax regime, rebate of Rs 12,500 continues to be available for total income up to Rs 5,00,000.
Deductions: New Vs Old Tax Regime
Income tax deductions pertain to specific deductions which a taxpayer is eligible for on account of investments made (Section 80C) or sum expended (Section 80D or Section 80E). It is available only under the old tax regime.
The Old Tax Regime allows deductions under various sections, such as:
Section 80C: Up to Rs 1,50,000 for investments like PPF, ELSS, and LIC premiums.
Section 80D: Health insurance premiums.
Section 24(b): Interest on home loan up to Rs 2,00,000.
Other exemptions like HRA and LTA.
Budget 2025: Income Tax Slabs Under NTR Vs OTR for FY2025-26
Under the new regime, the income tax slabs announced in the latest Union Budget 2025-26 are:
- Income up to Rs 4,00,000: Nil
- Income from Rs 4,00,001 to Rs 8,00,000: 5%
- Income from Rs 8,00,001 to Rs 12,00,000: 10%
- Income from Rs 12,00,001 to Rs 16,00,000: 15%
- Income from Rs 16,00,001 to Rs 20,00,000: 20%
- Income from Rs 20,00,000 to Rs 24,00,000: 25%
- Income above Rs 24,00,000: 30%.
Importantly, those earning up to Rs 12.75 lakh a year (including a standard deduction of Rs 75,000) will have to pay zero tax during FY25-26.
Tax Rates Under The Old Tax Regime
Under the old regime, income tax rates continue to remain the same:
- Income up to Rs 2,50,000: Nil
- Income from Rs 2,50,001 to Rs 5,00,000: 5%
- Income from Rs 5,00,001 to Rs 10,00,000: 20%
- Income above Rs 10,00,000: 30%
For senior citizens aged 60-80 years, the basic exemption limit is Rs 3,00,000. For super senior citizens (above 80 years), it is Rs 5,00,000.
These Will Apply From FY26; What About Tax Slabs In Current Financial Year?
The income tax changes announced in the Budget 2025-26 will be applicable for the next financial year 2025-26, with effect from April 1, 2025. Though the new tax regime has been tweaked, the old tax regime remains the same. So, old tax regime slabs are same for both FY2024-25 and FY2025-26, the slabs under the new tax regime were different for the current year (FY2024-25). These are as follows:
- Income up to Rs 3,00,000: Nil
- Income from Rs 3,00,001 to Rs 7,00,000: 5% (tax rebate under Section 87A up to Rs 7 lakh)
- Income from Rs 7,00,001 to Rs 10,00,000: 10%
- Income from Rs 10,00,001 to Rs 12,00,000: 15%
- Income from Rs 12,00,001 to Rs 15,00,000: 20%
- Income above Rs 15,00,000: 30%.
The Union Budget 2025 has given stimulus to the middle class to boost consumption in the economy to boost overall economic growth.
