If you’re trying to make smarter money decisions this year, understanding where you stand in the new income tax slab is a good place to start. Whether you’re a salaried employee, a small business owner, or a freelancer trying to file your ITR correctly, the revised slabs for the financial year 2025–26 (assessment year 2026–27) will affect what you keep and what you owe as taxes.
This year’s budget has introduced some changes to the income tax brackets under the new regime, and many taxpayers will find the new structure more attractive than before. But is it really better for you? Read on to understand the implications of the tax slabs in 2025-26 for your unique situation.
● The first ₹4 lakh is tax-free. ● The next ₹4 lakh is taxed at 5%, which equals ₹20,000. ● The final ₹1 lakh is taxed at 10%, which equals ₹10,000. ● Total tax is equal to ₹30,000 (plus cess).
Now, when we compare these numbers with the older regime, we see that while standard deductions and exemptions would help, tax rates were higher and more complex. In many such cases, especially where deductions aren't maximised, the new income tax slab works out to be the better option.
For people with incomes between ₹8 lakh and ₹15 lakh, this structure is likely to bring some much-needed relief, especially if you don’t claim many deductions.
In contrast, the new regime removes most deductions but offers lower rates. The government has also tried to make the new regime more attractive by providing a standard deduction of ₹75,000, which was not available in earlier versions or was lower.
One innovative approach is to run your numbers under both regimes, and then choose what gives you the better result when you e file income tax return online.
Let’s say you’re just starting with an annual income of ₹6.5 lakh.
* ₹4 lakh is tax-free. * ₹2.5 lakh is taxed at 5%, which comes to ₹12,500. * After standard deduction (₹75,000), your taxable income falls further, and you may also qualify for a rebate under Section 87A. The end result is that you might pay zero tax, and still not have to lock away your savings in a 5-year FD or ELSS just for deduction purposes.
If you’re earning ₹30 lakh or more annually, and you already maximise all your exemptions and deductions, the old regime may offer better benefits. But if your expenses aren’t structured for tax savings (e.g. no home loan, limited Section 80C investments), the new regime could still be leaner.
That’s why premium insurance providers like Axis Max Life Insurance have built online calculators that let you compare both regimes side by side. What Happens When You File Under the New Regime?
When you e-file your income tax return, the online portal (or your CA) will ask you to choose between the old and new tax regimes. If you choose the new regime:
* You cannot claim most deductions under 80C, 80D, 24(b), etc. * You’ll still be eligible for ₹75,000 standard deduction. * If your income is within the Section 87A limit (approx ₹7 lakh), you get a full rebate and pay no tax.
Summing Up Important Points For Tax Planning in 2025 * Compare both regimes yearly: Your financial life evolves. What worked last year may not work this year. * Use your employer’s tools: If you're salaried, your HR or payroll software may already show comparisons. * Don’t rush investments for deductions: Use tax-free allowances wisely, but don’t base your investment decisions only on saving tax. * Use excess savings well: If you save tax under the new regime, direct that towards protection, long-term savings, or debt repayment. * Don’t forget to file on time: Whether you use deductions or not, your return must be accurate. When you e-file your income tax return, always verify using your Aadhaar-linked OTP or bank account.
But like everything to do with taxes, planning is still the most important thing. With tools from credible insurers like Axis Max Life Insurance, you can simulate your tax outgo, adjust your protection, and plan better, whether under the old or new system.
Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.
Tax benefit is subject to change as per the prevailing tax laws.
A Snapshot of the New Income Tax Slab
The new income tax slab under Section 115BAC continues to be optional, which means that you can still choose to file under the old regime if that works better for you. But the latest revisions are designed to simplify tax compliance and reduce the tax outgo for middle-income groups.
How The New Tax Slabs Affect Your Tax Payable
To best understand the impact of the latest tax slabs in India in 2025, below is an example. To start with, assume that your taxable income is ₹9 lakh for FY 2025–26.● The first ₹4 lakh is tax-free. ● The next ₹4 lakh is taxed at 5%, which equals ₹20,000. ● The final ₹1 lakh is taxed at 10%, which equals ₹10,000. ● Total tax is equal to ₹30,000 (plus cess).
Now, when we compare these numbers with the older regime, we see that while standard deductions and exemptions would help, tax rates were higher and more complex. In many such cases, especially where deductions aren't maximised, the new income tax slab works out to be the better option.
For people with incomes between ₹8 lakh and ₹15 lakh, this structure is likely to bring some much-needed relief, especially if you don’t claim many deductions.
But Should You Switch From the Old Regime?
Not necessarily. The old regime continues to offer exemptions under Sections 80C, 80D, HRA, LTA, interest on home loans, and more. If your tax-saving investments are high, the old regime could still save you more money.In contrast, the new regime removes most deductions but offers lower rates. The government has also tried to make the new regime more attractive by providing a standard deduction of ₹75,000, which was not available in earlier versions or was lower.
One innovative approach is to run your numbers under both regimes, and then choose what gives you the better result when you e file income tax return online.
What It Means for Salaried Individuals and Young Professionals
For young earners and those without too many investments yet, the new regime keeps things simple since you don’t have to track Section 80C limits or worry about where to invest by March 31st.Let’s say you’re just starting with an annual income of ₹6.5 lakh.
* ₹4 lakh is tax-free. * ₹2.5 lakh is taxed at 5%, which comes to ₹12,500. * After standard deduction (₹75,000), your taxable income falls further, and you may also qualify for a rebate under Section 87A. The end result is that you might pay zero tax, and still not have to lock away your savings in a 5-year FD or ELSS just for deduction purposes.
A Look at Higher Income Brackets
The top 30% rate applies to anything above ₹24 lakh, and surcharge and cess still apply. But even here, the spread of lower slabs before the 30% bracket helps in reducing the effective tax rate.If you’re earning ₹30 lakh or more annually, and you already maximise all your exemptions and deductions, the old regime may offer better benefits. But if your expenses aren’t structured for tax savings (e.g. no home loan, limited Section 80C investments), the new regime could still be leaner.
That’s why premium insurance providers like Axis Max Life Insurance have built online calculators that let you compare both regimes side by side. What Happens When You File Under the New Regime?
When you e-file your income tax return, the online portal (or your CA) will ask you to choose between the old and new tax regimes. If you choose the new regime:
* You cannot claim most deductions under 80C, 80D, 24(b), etc. * You’ll still be eligible for ₹75,000 standard deduction. * If your income is within the Section 87A limit (approx ₹7 lakh), you get a full rebate and pay no tax.
But if you file under the old regime -
* You must declare and show all deductions properly. * You need to maintain proof (receipts, premiums, etc.) * You’ll face slightly higher rates, but your taxable income will be reduced due to exemptions.Summing Up Important Points For Tax Planning in 2025 * Compare both regimes yearly: Your financial life evolves. What worked last year may not work this year. * Use your employer’s tools: If you're salaried, your HR or payroll software may already show comparisons. * Don’t rush investments for deductions: Use tax-free allowances wisely, but don’t base your investment decisions only on saving tax. * Use excess savings well: If you save tax under the new regime, direct that towards protection, long-term savings, or debt repayment. * Don’t forget to file on time: Whether you use deductions or not, your return must be accurate. When you e-file your income tax return, always verify using your Aadhaar-linked OTP or bank account.
Conclusion
The new income tax slab for FY 2025–26 gives more people room to plan their money the way they want. It doesn’t penalise you for not owning a house or not investing in specific instruments.But like everything to do with taxes, planning is still the most important thing. With tools from credible insurers like Axis Max Life Insurance, you can simulate your tax outgo, adjust your protection, and plan better, whether under the old or new system.
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Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read the sales brochure/policy wording carefully before concluding a sale.Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.
Tax benefit is subject to change as per the prevailing tax laws.