How new tax regime works
(FY 2025-26)
The government has proposed a revised structure under which the tax slabs have been further broken down. The first slab is up to Rs 4 lakh, in which the tax remains nil. Earlier it was Rs 3 lakh. The next slab is Rs 4-8 lakh where the tax rate is 5%, followed by 10% in the Rs 8-12 lakh slab, 15% in the Rs 12-16 lakh slab, 20% in the Rs 16-20 lakh slab, and 25% in the Rs 20-24 lakh slab. It's flat 30% above Rs 24 lakh.
| Income Range | Tax Percentage |
|---|---|
| Up to 4 lakh | 0% |
| 4 lakh - 8 lakh | 5% |
| 8 lakh - 12 lakh | 10% |
| 12 lakh - 16 lakh | 15% |
| 16 lakh - 20 lakh | 20% |
| 20 lakh - 24 lakh | 25% |
| Above 24 lakh | 30% |
New Tax Regime Tax Slabs
According to the Budget document, the government will provide rebates to those earning up to Rs 12 lakh. For salaried individuals, this threshold is Rs 12.75 lakh, including the standard deduction of Rs 75,000. The Budget document has a table that illustrates the government's rebates, starting from Rs 10,000 for an income of Rs 8 lakh and rising to Rs 80,000 for an individual making Rs 12 lakh.
If an annual income of Rs 16 lakh is taken as an example, there will be zero tax up to Rs 4 lakh. Then, in the Rs 4 lakh-Rs 8 lakh bracket, a 5 per cent tax will be levied - Rs 20,000. In the Rs 8 lakh-Rs 12 lakh bracket, there will be a 10 per cent tax - Rs 40,000. And in the Rs 12 lakh - Rs 16 lakh slab, the rate is 15 per cent -- meaning Rs 60,000. So, you will pay a total tax of Rs 1,20,000. This is Rs 50,000 less than what you are currently paying.