India's New Tax Regime has become the default regime for FY 2025-26. Unless you opt out and choose the Old Regime (which allows deductions like 80C, HRA, etc.), your employer will calculate TDS under the New Regime.
New Regime Tax Slabs for FY 2025-26
| Income Range | Tax Rate |
|---|---|
| Up to ₹3,00,000 | 0% |
| ₹3,00,001 – ₹6,00,000 | 5% |
| ₹6,00,001 – ₹9,00,000 | 10% |
| ₹9,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Important: Each slab is exactly ₹3L wide. The tax is calculated on the slab amount that falls within each band — not on total income.
Standard Deduction: ₹75,000
Salaried employees and pensioners get a ₹75,000 standard deduction under the New Regime from FY 2024-25 onwards (increased from ₹50,000). This means:
- Gross salary ₹12,75,000 → Taxable income ₹12,00,000 → Tax = ₹0 (covered by rebate u/s 87A)
- Gross salary ₹13,00,000 → Taxable income ₹12,25,000 → Tax applies on ₹25,000 above ₹12L
Section 87A Rebate
If your taxable income is ₹7,00,000 or less, the Section 87A rebate wipes out your entire tax liability. Combined with the ₹75,000 standard deduction, salaried employees with gross salary up to ₹7,75,000 pay zero income tax.
Worked Example: ₹10L Gross Salary
| Step | Amount |
|---|---|
| Gross Salary | ₹10,00,000 |
| Less: Standard Deduction | ₹75,000 |
| Taxable Income | ₹9,25,000 |
| Tax on ₹0–3L @ 0% | ₹0 |
| Tax on ₹3–6L @ 5% | ₹15,000 |
| Tax on ₹6–9L @ 10% | ₹30,000 |
| Tax on ₹9–9.25L @ 15% | ₹3,750 |
| Total Tax + 4% Cess | ≈ ₹50,700 |
Old Regime vs New Regime: When to Choose Which
The Old Regime still makes sense if you claim substantial deductions:
- 80C investments (PPF, ELSS, LIC): up to ₹1.5L
- HRA exemption: can be significant for metro city renters
- 80D health insurance premium: up to ₹25,000–₹50,000
- Home loan interest (Section 24b): up to ₹2L
As a thumb rule: if your total deductions exceed ₹3.75L (for income above ₹15L), the Old Regime is likely better. Use our income tax calculator to compare both scenarios side by side instantly.
Capital Gains Tax Changes (Budget 2024)
Two major changes came into effect from July 23, 2024:
- LTCG on equity: Rate increased from 10% to 12.5%. Exemption limit increased from ₹1L to ₹1.25L per year.
- LTCG on property and gold: Rate reduced from 20% (with indexation) to 12.5% without indexation for properties purchased after July 23, 2024. Properties bought before this date can choose the better of the two methods.