Tax planning doesn’t have to be complicated. With the new tax regime for 2025-26, the government has simplified tax slabs to make things easier for taxpayers. Whether you’re a salaried individual, freelancer, or business owner, understanding these slabs can help you plan your finances better. Let’s break it down step by step.
Old Tax Regime (With Deductions)
The old tax regime allows you to claim deductions under sections like 80C, 80D, HRA, and more. Here’s the slab structure for 2024-25 and 2024-25:
Example: If your annual income is ₹12 lakh, your tax calculation would look like this:
- ₹0 on the first ₹2.5 lakh.
- ₹12,500 on the next ₹2.5 lakh (5%).
- ₹1,00,000 on the next ₹5 lakh (20%).
- ₹60,000 on the remaining ₹2 lakh (30%).
Total Tax: ₹1,72,500 (before deductions).
Key Features of the Old Regime
- The old tax regime allows you to claim deductions under Various sections like. Taxpayers can claim deductions under sections like 80C, 80D, HRA, LTA, and more.
- Popular investments like PPF, ELSS, life insurance premiums, and home loan repayments qualify for deductions.
- The old regime has higher tax rates compared to the new regime.However, deductions can significantly reduce taxable income.
- Requires detailed documentation and calculations to claim deductions.Suitable for individuals with significant investments and expenses.
- Taxpayers can choose between the old and new regimes each year (if they are salaried).
New Tax Regime (No Deductions)
The new tax regime, introduced to simplify taxes, offers lower rates but removes most deductions. Here’s the slab structure for 2024-25.
Example: If your annual income is ₹12 lakh under the new regime:
- ₹0 on the first ₹3 lakh.
- ₹15,000 on the next ₹3 lakh (5%).
- ₹30,000 on the next ₹3 lakh (10%).
- ₹45,000 on the next ₹3 lakh (15%).
Total Tax: ₹90,000 (no deductions).
New Tax Regime Slabs for 2025-26
The new tax regime offers lower tax rates but removes most deductions (like Section 80C, HRA, etc.). Here’s the updated slab structure for 2025-26:
Example Calculation
Let’s say your annual income is ₹18 lakh. Here’s how your tax will be calculated under the new regime:
- ₹0–₹4 lakh: 0% tax = ₹0.
- ₹4 lakh–₹8 lakh: 5% tax = ₹20,000.
- ₹8 lakh–₹12 lakh: 10% tax = ₹40,000.
- ₹12 lakh–₹16 lakh: 15% tax = ₹60,000.
- ₹16 lakh–₹18 lakh: 20% tax = ₹40,000.
Total Tax: ₹1,60,000.
Key Features of the New Regime
- No Deductions: Unlike the old regime, you cannot claim deductions under sections like 80C, 80D, or HRA.
- Standard Deduction: A flat deduction of ₹50,000 is available for salaried individuals.
- Rebate under Section 87A: If your taxable income is below ₹7 lakh, you may qualify for a rebate, making your tax liability zero.
Should You Choose the New Regime?
The new regime is ideal for:
- Individuals who don’t have significant investments or expenses to claim deductions.
- Those who prefer simplicity and don’t want to deal with complex tax-saving calculations.
However, if you have substantial investments (e.g., PPF, life insurance, home loan), the old regime might still save you more money.
Final Thoughts
The new tax regime for 2025-26 offers lower tax rates and simplicity, making it a great option for many taxpayers. However, it’s essential to evaluate your financial situation and choose the regime that works best for you. If you’re unsure, consult a tax advisor to make an informed decision.
