The Indian government’s Budget 2025 brought major changes to the income tax structure. The new tax regime now makes income up to ₹12,00,000 effectively tax-free, thanks to higher rebates and raised exemption limits. Salaried individuals benefit from a ₹75,000 standard deduction, pushing the tax-free threshold to ₹12.75 lakh. At the same time, the new regime uses a more graduated slab system (0% to 30% across higher income bands). In contrast, the old tax regime remains unchanged, so taxpayers can still choose it if their deductions (like 80C, HRA, home loan interest) make it more beneficial

Key Highlights of Income Tax :

Zero Tax up to ₹12L (new regime): No tax on income up to ₹12,00,000 (₹12.75L for salaried, due to ₹75k deduction) in FY 2025-26.
New Slab Rates: Revised new-regime slabs: 0% (₹0–4L), 5% (₹4–8L), 10% (₹8–12L), 15% (₹12–16L), 20% (₹16–20L), 25% (₹20–24L), 30% (above ₹24L).
Standard Deduction Raised: Salaried taxpayers get ₹75,000 standard deduction (up from ₹50,000), effectively raising the ₹0% band to ₹12.75L.
87A Rebate Hiked: Section 87A rebate is now ₹60,000 for incomes up to ₹12L, meaning those incomes incur zero tax.
Old Regime Unchanged: Traditional slabs (nil up to ₹2.5L or ₹3L for seniors, etc.) and deductions stay the same

Income Tax Calculator – FY 2025-26

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Parameter	Value/Rate (FY 2025-26)	Official Source
New Regime Tax-Free Limit	₹12,00,000 (₹12.75L effective with ₹75k deduction)	Union Budget 2025 Press Release
New Regime Slab Rates	0% (0–4L), 5% (4–8L), 10% (8–12L), 15% (12–16L), 20% (16–20L), 25% (20–24L), 30% (>24L)	Union Budget 2025 Press Release
Standard Deduction (Salaried)	₹75,000	Union Budget 2025 Press Release
Section 87A Rebate (New Regime)	₹60,000 (for income ≤ ₹12,00,000)	Union Budget 2025 Press Release (Sec. 87A amendment)

Content Overview

The table above summarizes the most important figures announced in Budget 2025. The official Union Budget press release (Ministry of Finance/PIB) confirms that incomes up to ₹12 lakh are tax-free under the new regime, and lists all the revised tax rates. Now let’s dive into the details of these changes and see how to compute your taxes under the new rules.

Revised Income Tax Slabs (New Tax Regime)

Under the new Income Tax regime for FY 2025-26, the Government has expanded the nil-tax band and added more bands with lower rates. As per the Budget announcement, the slab rates are:

0% tax on income from ₹0 to ₹4,00,000 (new sub-band).
5% tax on income from ₹4,00,001 to ₹8,00,000.
10% tax on income from ₹8,00,001 to ₹12,00,000.
15% tax on income from ₹12,00,001 to ₹16,00,000.
20% tax on income from ₹16,00,001 to ₹20,00,000.
25% tax on income from ₹20,00,001 to ₹24,00,000.
30% tax on income above ₹24,00,000.

This revised structure means a smoother progression compared to prior law. For example, the new zero-tax ceiling (₹4 lakh) is higher than before, and the top 30% rate now only kicks in at ₹24 lakh rather than ₹10 lakh as under the old regime. These details are confirmed by both the official Budget release and financial reports.

In summary, incomes up to ₹12 lakh pay no tax under this regime. This is a combined result of the new slab rates plus the enhanced Section 87A rebate (discussed below). In fact, financial analysts note that “individuals earning up to ₹12,00,000 are effectively exempt from paying income tax” thanks to the higher rebate and relaxed slabs

It’s important to remember that under the new regime you forgo most deductions and exemptions (like HRA, 80C, 80D, etc.) in exchange for these lower rates and rebates. Taxpayers should compare the total tax under both regimes using all available deductions to decide which works better.

Old Income Tax Regime (No Changes)

The old tax regime (with higher rates and many exemptions) has no changes in 2025-26. That means the existing slabs (nil up to ₹2.5L for non-seniors, ₹2.5–5L at 5%, ₹5–10L at 20%, above ₹10L at 30%, plus health/education cess) remain intact. Seniors retain higher basic exemption (₹3L for 60–80yrs, ₹5L for 80+) as before. All familiar deductions and rebates continue (for example, deduction under 80C up to ₹1.5L, home loan interest, NPS, etc.) for those opting to stay in the old regime.

In Budget 2025, the Finance Minister explicitly announced no change to the old tax slabs or deductions. This means a taxpayer can still claim all standard exemptions under the old regime if that yields a lower tax. In practice, taxpayers now have two paths: use the new, simplified regime for relief on plain income, or stick to the old path if their deductions are substantial. (For incomes above roughly ₹20–25 lakh, the old regime may still win out if one has large tax-saving investments.

Increased Rebates & Deductions on Income Tax

Two key elements amplify the benefits of the new tax slabs: Section 87A rebate and the standard deduction.

Section 87A (New Regime): The rebate under Section 87A has been hiked from ₹25,000 to ₹60,000 for FY 2025-26 (new regime). This means any taxpayer (new regime) with taxable income up to ₹12,00,000 gets a full ₹60,000 rebate, effectively bringing their tax to zero. (For comparison, under the old regime the 87A rebate remains ₹12,500 for incomes up to ₹5 lakh, unchanged.) Thus Finance Minister Sitharaman has achieved “net zero tax for annual income up to Rs. 12 lakh” by this rebate enhancement.
Standard Deduction: Salaried and pensioned taxpayers receive a ₹75,000 standard deduction (up from ₹50,000). This extra ₹25k raises the effective tax-free salary threshold to ₹12.75 lakh. In other words, a salaried individual earning up to ₹12.75 lakh will pay zero tax under the new regime (12 lakh covered by rebate + 75k standard deduction).

Combined, these features mean that a middle-class salaried earner with ₹12 lakh income benefits twice: reduced slab rates and larger deductions/rebates. Experts note this is “a huge step towards relief for the middle class”

Surcharge & Cess charges on Income Tax

Above the slabs, surcharge and cess still apply in the usual way. Health and Education Cess at 4% continues to be levied on tax-plus-surcharge for all taxpayers. The surcharge rates have been moderated for the new regime: at very high incomes, the new regime caps surcharge at 25%, whereas the old regime could go up to 37% for top incomes. This means ultra-rich individuals get a slightly lower effective rate under the new system if they had large income.

In short, while surcharges/cess are in addition to any slab-based tax, the new law provides some relief by keeping the surcharge on tax capped. For example, a person earning over ₹5 crore would pay a 37% surcharge on their tax under the old regime, but only 25% under the new regime.

Calculating Income Tax for FY 2025-26

Given these changes, taxpayers often wonder how to figure out their liability. The good news is that online income tax calculators have been updated for FY 2025-26. These tools let you plug in your income and deductions, then compute tax under both regimes.

Step-by-Step Guide to Using an Income Tax Calculator:

Choose the financial year: Select FY 2025-26 (or Assessment Year 2026-27) in the calculator, since slabs changed for this period.
Enter your income details: Input total salary, pension, interest, and any other incomes for the year.
Select deductions (if any): Under the old regime, enter exemptions like 80C, 80D, HRA, home loan interest, etc. Under the new regime, most deductions don’t apply except the ₹75k standard deduction (for salaried).
Toggle between regimes: Many calculators allow computing tax under both new and old regimes. Choose the new regime option to apply the fresh slabs and rebates.
Compute tax: Hit “Calculate” to see the tax liability. The tool will apply the slabs, cess and applicable surcharge. It will also factor in the ₹60k rebate and ₹75k standard deduction automatically, based on your entries.
Compare results: Review the tax amount under each regime. The calculator often highlights which option yields lower tax. You can adjust your inputs (like additional investments for old regime) to see if results change.

Conclusion

The FY 2025-26 tax overhaul delivers significant relief to middle-income earners. The new tax regime’s expanded exemption limit (zero tax up to ₹12L) and more granular slabs mean most taxpayers will pay less tax on a given income. At the same time, the higher 87A rebate (₹60k) and increased standard deduction (₹75k) ensure that salaries up to ₹12.75L are effectively tax-free. Importantly, the old regime hasn’t disappeared – it remains available if your deductions are large enough to make it worthwhile.

To navigate these options, use an updated income tax calculator: enter your income, apply deductions, and compare the tax outgo under both regimes. This will show your exact tax as per the latest slabs and rules. Always keep reliable sources at hand – for instance, the government’s official Budget documents and Income Tax Department notifications – to verify the rates and exemptions. By staying informed and using the calculator wisely, you can maximize your savings and remain compliant under the new Income Tax structure for 2025-26.