India New Tax Regime Guide: Budget 2025 Slabs & Deductions Explained
The Union Budget 2025 introduced major amendments to India’s New Tax Regime, making it the default and highly attractive choice for salaried individuals. The tax brackets have been widened, and the exemption thresholds have been increased.
To calculate your exact tax liabilities and take-home pay, try our interactive In-Hand Salary Calculator.
What’s New in Budget 2025 for Salaried Employees?
Key changes applicable for the Financial Year (FY) 2025-26 (Assessment Year 2026-27) include:
- Standard Deduction Hiked: The standard deduction for salaried individuals under the New Tax Regime is increased from ₹50,000 to ₹75,000.
- Rebate Limit Raised: Under Section 87A, taxpayers with a total net taxable income up to ₹12,00,000 will pay zero tax.
- Wider Slabs: Exemption brackets have been revised, starting with nil tax up to ₹4 Lakhs.
New Tax Regime Slab Rates (FY 2025-26 / AY 2026-27)
| Annual Income Bracket | New Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil (0%) |
| ₹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% |
Old Regime vs. New Regime: Which is Better?
While the New Regime has lower tax rates, it does not allow traditional deductions such as Section 80C (EPF/PPF/ELSS), Section 80D (Health Insurance), or HRA exemption.
- Choose the New Regime if you do not want the hassle of locking up funds in investment schemes, and want to leverage the higher zero-tax limit of ₹12 Lakhs.
- Choose the Old Regime if you have large deductions (such as home loan interest, high HRA, and full 80C investments) exceeding ₹3.75 Lakhs in value.
Determine which regime saves you more money using our In-Hand Salary Calculator.