Income Tax Slabs for FY 2024-25 and AY 2025-26: A Detailed Guide to New and Old Regime Tax Rates

Income Tax Slabs for FY 2025-26: Key Updates on Surcharge, Cess, and New Tax Regime

The Finance Minister, in Budget 2025, announced significant revisions to the income tax slabs and rates under the new tax regime for FY 2025-26. The revised tax slabs are aimed at providing more tax relief to the middle-class taxpayers while also ensuring the tax structure remains progressive. This guide outlines the new income tax slabs, surcharge details, and key highlights from the 2025 Budget.

New Income Tax Slabs for FY 2025-26 (New Tax Regime)

Income Range (₹)	Tax Rate
Up to ₹4,00,000	Nil
₹4,00,001 - ₹8,00,000	5%
₹8,00,001 - ₹12,00,000	10%
₹12,00,001 - ₹16,00,000	15%
₹16,00,001 - ₹20,00,000	20%
₹20,00,001 - ₹24,00,000	25%
Above ₹24,00,000	30%

Surcharge and Cess for FY 2025-26

In addition to the revised tax slabs, taxpayers will be required to pay surcharge and cess based on their income. Here are the details for the Surcharge and Cess:

Income Range (₹)	Surcharge Rate
Above ₹50,00,000 and up to ₹1,00,00,000	10%
Above ₹1,00,00,000 and up to ₹2,00,00,000	15%
Above ₹2,00,00,000	25%

Cess: An additional Health and Education Cess of 4% will be levied on the total tax liability, including surcharge, for all taxpayers.

Taxation on ULIPs: New Rules

In Budget 2025, an important change has been made regarding the taxation of Unit Linked Insurance Plans (ULIPs). If the annual premium of a ULIP exceeds ₹2.5 lakh, it will be taxed as capital gains or income from other sources. This amendment aims to bring more clarity on the taxation of ULIPs and non-ULIPs, especially where the premium exceeds the specified threshold.

Fixed Deposit Tax Relief for Senior Citizens

A significant benefit for senior citizens has been introduced. The TDS threshold on interest earned from fixed deposits has been increased from ₹50,000 to ₹1,00,000, providing senior citizens with greater relief and avoiding the hassle of filing returns for interest income up to ₹1 lakh.

Income Tax for Salaried Employees

In another important announcement, the Finance Minister revealed that salaried employees earning up to ₹12 lakh annually (excluding special income like capital gains) will be tax-free under the new regime, due to an increased tax rebate and standard deduction. Employees can now avail of a standard deduction of ₹75,000 from their income, further reducing their taxable income.

Tax Rebate under Section 87A

For taxpayers with a total income of up to ₹7 lakh, the government has increased the rebate under Section 87A, making their tax liability effectively zero. This change is aimed at providing more relief to low-income taxpayers under the new tax regime.

Conclusion

The Union Budget 2025 has introduced several important reforms to simplify the tax system and provide relief to the middle class. With revised income tax slabs, increased tax-free income limits, and enhanced rebates, taxpayers can expect a more favorable tax environment for the upcoming financial year. As always, taxpayers should evaluate both the old and new tax regimes to determine the most beneficial option based on their specific financial situation.