It's Budget time, and the attention will once again be on income tax slabs when Finance Minister Nirmala Sitharaman delivers her speech on February 1.
During the Union Budget 2025, tax slabs under the new regime were relaxed significantly, altering how taxpayers calculate and plan their annual tax outgo.
Income Tax Slabs For FY 2025-26 Under New Tax Regime
Under the new tax regime for FY 2025-26, income tax rates are structured across multiple slabs:
- Income up to Rs 4 lakh is tax-free
- Rs 4 lakh to Rs 8 lakh: 5%
- Rs 8 lakh to Rs 12 lakh: 10%
- Rs 12 lakh to Rs 16 lakh: 15%
- Rs 16 lakh to Rs 20 lakh: 20%
- Rs 20 lakh to Rs 24 lakh: 25%
- Rs 24 lakh and above: 30%
Due to an increase in the rebate to Rs 60,000 under the new tax regime, the total tax liability for people earning up to Rs 12 lakh is nil. This rebate, though, does not apply to special income such as capital gains, crypto income and online gaming income.
There are no concessional slab rates or separate slab benefits for senior citizens under the new tax regime.
Income Tax Slabs For FY 2025-26 Under Old Tax Regime
The income tax slabs under the old tax regime remain unchanged.
- Income up to Rs 2.5 lakh is tax-free
- Rs 2.5 lakh to Rs 5 lakh: 5%
- Rs 5 lakh to Rs 10 lakh: 20%
- Rs 10 lakh and above is taxed at 30%
Popular Deductions Available Under Old Tax Regime
Taxpayers opting for the old tax regime can claim several deductions, including:
- Section 80C, 80D, 80G and 80TTA
- House Rent Allowance (HRA), Leave Travel Allowance (LTA), and home loan interest under Section 24
- Education loan interest under Section 80E, among others
Income Tax Slabs For Super Senior Citizens
For super senior citizens aged above 80 years, the basic exemption limit is higher.
- Income up to Rs 5 lakh is tax-free
- Rs 5 lakh to Rs 10 lakh: 20%
- Income above Rs 10 lakh is taxed at 30%
Understanding which tax regime is more beneficial is considered the first step in the income tax filing process.
How To Calculate Income Tax
Calculating income tax manually can be complex and time-consuming. To simplify the process, online income tax calculators can be used to estimate tax liability based on income, applicable slabs and deductions. Tools provided by fintech platforms and banks can be used.
How To Calculate Income Tax On Salary
Calculating income tax on salary involves several steps. The process begins with computing gross salary, which includes basic salary, allowances, bonuses and other taxable components.
From the gross salary, exemptions such as House Rent Allowance (HRA), Leave Travel Allowance (LTA) and the standard deduction can be applied. These exemptions are available only under the old tax regime.
Eligible deductions under various sections of the Income Tax Act can then be claimed, including Section 80C for Provident Fund, PPF or life insurance, Section 80D for health insurance premiums and Section 24b for home loan interest. These deductions are also applicable only under the old tax regime.
Taxable income is arrived at by subtracting eligible exemptions and deductions from the gross salary.
