The Union Budget 2025-26 introduced significant changes to personal income tax, aiming to increase disposable income for the middle class and stimulate economic growth. Below are the key insights into the revised tax slabs, rates and rebates.
1. Who is exempt from paying income tax?
Under the new tax regime, the tax-free income limit for salaried individuals and pensioners has been increased to ₹12 lakh per annum. With the standard deduction of ₹75,000, individuals earning up to ₹12.75 lakh will pay no tax.
2. Revised income tax slabs for FY 2025-26
| Total income (₹) | Tax rate |
|---|---|
| Up to 4,00,000 | Nil |
| 4,00,001 to 8,00,000 | 5% |
| 8,00,001 to 12,00,000 | 10% |
| 12,00,001 to 16,00,000 | 15% |
| 16,00,001 to 20,00,000 | 20% |
| 20,00,001 to 24,00,000 | 25% |
| Above 24,00,000 | 30% |
3. Applicability of the new tax regime
The new tax regime applies to salary and pension income. Special incomes such as capital gains, business income and foreign earnings may have separate tax treatments.
4. ITR filing requirements
Even if no tax is payable, individuals must file an ITR if their income exceeds ₹4 lakh. Filing is also essential for loan approvals, visa applications, and claiming tax refunds.
5. Key benefits of the new tax regime
The new regime offers higher disposable income due to reduced tax rates, a standard deduction of ₹75,000 for salaried individuals, and a simplified tax structure with fewer deductions.
6. Tax slabs under the old tax regime
| Income (₹) | Tax rate | Surcharge |
|---|---|---|
| Up to 2,50,000 | Nil | Nil |
| 2,50,001 – 5,00,000 | 5% | Nil |
| 5,00,001 – 10,00,000 | 20% | Nil |
| 10,00,001 – 50,00,000 | 30% | Nil |
| 50,00,001 – 1,00,00,000 | 30% | 10% |
| 1,00,00,001 – 2,00,00,000 | 30% | 15% |
| 2,00,00,001 – 5,00,00,000 | 30% | 25% |
| Above 5,00,00,000 | 30% | 37% |
7. Deductions under the new tax regime
Limited deductions apply, such as employer contributions to NPS and EPF. Other popular deductions — Section 80C, 80D and HRA — remain available only under the old tax regime.
8. Can taxpayers switch between regimes?
Salaried individuals can switch between the old and new regimes each year. Business owners and professionals can switch only once after opting out of the new regime.
9. Deadline for filing updated ITRs
The deadline for filing updated ITRs has been extended from 2 years to 4 years. Delayed filings attract an additional tax of 60–70%, depending on the delay period.
10. Key takeaways from Budget 2025-26
The headline changes: a higher tax-free income limit of ₹12 lakh (effectively ₹12.75 lakh with standard deduction); revised slabs under the new regime that reduce tax liability; the old regime left unchanged, with taxpayers free to choose; and an extended deadline of four years for updated ITRs.
Stay compliant. Stay protected. — WeConsult India