FM Nirmala Sitharaman also announced that she will be tabling the New Income Tax Bill in Parliament next week.
Budget 2025 income tax slab changes 2025-2026 explained: In a big cheer for the salaried middle class taxpayers, FM Nirmala Sitharaman announced sweeping changes to the income tax slabs and income tax rates under the new income tax regime for FY 2025-26. FM Nirmala Sitharaman also announced that she will be tabling the New Income Tax Bill in Parliament next week.
All income tax slabs and rate changes have been announced under the new income tax regime – and the biggest takeaway is that an individual earning Rs 12 lakh will have to now pay NIL or ZERO tax under the new regime.
So, if you are a salaried taxpayer with income up to Rs 12.75 lakh, then including the Rs 75,000 standard deduction, your income tax outgo will be 0!
“Right after 2014, the ‘Nil tax’ slab was raised to Rs 2.5 lakh, which was further raised to Rs 5 lakh in 2019 and to Rs 7 lakh in 2023. This is reflective of our Government’s trust on the middle-class tax payers. I am now happy to announce that there will be no income tax payable up to income of Rs 12 lakh (i.e. average income of Rs 1 lakh per month other than special rate income such as capital gains) under the new regime. This limit will be Rs 12.75 lakh for salaried tax payers, due to standard deduction of Rs 75,000,” FM Nirmala Sitharaman announced in her Budget speech.
FM Sitharaman went on to explain:
- A tax payer in the new regime with an income of Rs 12 lakh will get a benefit of Rs 80,000 in tax (which is 100% of tax payable as per existing rates).
- A person having income of Rs 18 lakh will get a benefit of Rs 70,000 in tax (30% of tax payable as per existing rates).
- A person with an income of Rs 25 lakh gets a benefit of Rs 1,10,000 (25% of his tax payable as per existing rates).
Also Read | New vs old income tax regime after Budget 2025: Post income tax slab changes, which tax regime is better for salaried middle class taxpayers?
If you are confused about how much income tax you will save post Budget 2025 changes in income tax slabs under the new tax regime, we explain further:
Income Tax Slab Changes FY 2025-26: How much tax will you save at various salary levels?
- At a total taxable income of Rs 7 lakh, there is no additional benefit since under the earlier regime as well there was a tax rebate available up to Rs 7 lakh income
- At a total taxable income of Rs 10 lakh, there is an income tax benefit or saving of Rs 52,000/- including cess. The total income tax outgo will be NIL due to the rebate
- At a total taxable income of Rs 12 lakh, there is an income tax benefit or saving of Rs 83,200/- including cess. The total income tax outgo will be NIL due to the rebate
- At a total taxable income of Rs 20 lakh, there is an income tax benefit or saving of Rs 93,600/- including cess.
- At a total taxable income of Rs 27 lakh, there is an income tax benefit or saving of Rs 114,400/- including cess.
- At a total taxable income of Rs 55 lakh, there is an income tax benefit or saving of Rs 125,840/- including surcharge and cess.
- At a total taxable income of Rs 1.25 crore, there is an income tax benefit or saving of Rs 131,560/- including surcharge and cess.
- At a total taxable income of Rs 2.5 crore, there is an income tax benefit or saving of Rs 143,000/- including surcharge and cess.
“The Government has revamped the tax slabs and rates under the new tax regime in an effort to make it more attractive and widen its adoption by taxpayers. Individuals who are already being taxed under the new tax regime definitely stand to gain from the proposed changes in the tax rates, for instance, an individual having taxable income of Rs 27 lakhs will now save Rs 114,400 in taxes (including cess) under the proposed new tax regime as against the existing tax regime,” says Surabhi Marwah, Tax Partner, EY India.
The below income tax calculation tables explain this in greater detail:
| Particulars (INR) | New regime | Proposed new regime | New regime | Proposed new regime | New regime | Proposed new regime |
| Total Taxable Income | 700,000 | 700,000 | 1,000,000 | 1,000,000 | 1,200,000 | 1,200,000 |
| Tax | 20,000 | 15,000 | 50,000 | 40,000 | 80,000 | 60,000 |
| Rebate | (20,000) | (15,000) | – | (40,000) | – | (60,000) |
| Surcharge | – | – | – | – | – | – |
| Cess | – | – | 2,000 | – | 3,200 | – |
| Total Tax | – | – | 52,000 | – | 83,200 | – |
| Benefit under proposed new tax regime (without surcharge and cess) | – | 50,000 | 80,000 | |||
| Benefit under proposed new tax regime (including surcharge and cess) | – | 52,000 | 83,200 | |||
| Particulars (INR) | New regime | Proposed new regime | New regime | Proposed new regime | New regime | Proposed new regime |
| Total Taxable Income | 2,000,000 | 2,000,000 | 2,700,000 | 2,700,000 | 5,500,000 | 5,500,000 |
| Tax | 290,000 | 200,000 | 500,000 | 390,000 | 1,340,000 | 1,230,000 |
| Rebate | – | – | – | – | – | – |
| Surcharge | – | – | – | – | 134,000 | 123,000 |
| Cess | 11,600 | 8,000 | 20,000 | 15,600 | 58,960 | 54,120 |
| Total Tax | 301,600 | 208,000 | 520,000 | 405,600 | 1,532,960 | 1,407,120 |
| Benefit under proposed new tax regime (without surcharge and cess) | 90,000 | 110,000 | 110,000 | |||
| Benefit under proposed new tax regime (including surcharge and cess) | 93,600 | 114,400 | 125,840 | |||
| Particulars (INR) | New regime | Proposed new regime | New regime | Proposed new regime |
| Total Taxable Income | 12,500,000 | 12,500,000 | 22,500,000 | 22,500,000 |
| Tax | 3,440,000 | 3,330,000 | 6,440,000 | 6,330,000 |
| Rebate | – | – | – | – |
| Surcharge | 516,000 | 499,500 | 1,610,000 | 1,582,500 |
| Cess | 158,240 | 153,180 | 322,000 | 316,500 |
| Total Tax | 4,114,240 | 3,982,680 | 8,372,000 | 8,229,000 |
| Benefit under proposed new tax regime (without surcharge and cess) | 110,000 | 110,000 | ||
| Benefit under proposed new tax regime (including surcharge and cess) | 131,560 | 143,000 | ||
Source: EY
Latest Income Tax Slabs FY 2025-26 under New Income Tax Regime:
| Income Tax Slab | Income Tax Rate |
| 0-4 lakh | Nil |
| 4-8 lakh | 5% |
| 8-12 lakh | 10% |
| 12-16 lakh | 15% |
| 16-20 lakh | 20% |
| 20-24 lakh | 25% |
| Above 24 lakh | 30% |
New Tax Regime: Earlier Income Tax Slabs FY 2024-25:
| Income tax slabs (Rs) | Income tax rate |
| 0 – 3 lakh | 0% |
| 3-7 lakh | 5% |
| 7-10 lakh | 10% |
| 10-12 lakh | 15% |
| 12-15 lakh | 20% |
| Above 15 lakh | 30% |
