Income Tax Slabs For FY 2025-26 (AY 2026-27): New Vs Old Regime

The new tax regime is now the default, offering significant tax relaxations in the slab rates for FY 2025-26, while the income tax slabs for the old tax regime remain unchanged. 

In this blog post, we will discuss the income tax slabs for FY 2025-26 under the new and old rate regimes, and the tax-free income under both regimes for NRIs and Indian residents. 

Features Of The Old And The New Tax Regime 

The following table showcases the features of the old and the new tax regimes:

Income Tax Slabs For FY 2025-26 Under The New Tax Regime

The 2025 budget has provided major relaxations to the tax slabs under the new tax regime. The following are the new tax slab rates under the new tax regime for FY 2025-26. 

The New Tax Regime Features

• Rebate: The rebate under the new tax regime has been increased to Rs 60,000, effective from FY 2025-26. However, please note that an NRI taxpayer cannot claim a rebate under Section 87A. Additionally, a rebate does not apply to special tax income, such as capital gains. 
• Standard Deduction: Rs 75,000 of standard deduction is available under the new tax regime for annual income. 
• Surcharge: The maximum surcharge under the new tax regime is 25% for income exceeding the 2 crore threshold. 
• Senior Citizen Benefits: Under the new regime, there is no beneficial slab rate for senior citizens. 

Income Tax Slabs For FY 2025-26 Under Old Tax Regime 

From the 2023-24 financial year, the old tax regime has become optional. The slab rate for the old tax regime is as follows

1. Income Tax Slab For Individuals Below 60 Years, HUF & NRIs

The following are the popular tax deductions allowed under the old tax regime

• 80C, 80D, 80G, 80TTA
• HRA, LTA, Home Loan Interest ( Section 24 )
• Education Loan Interest ( Section 80E), etc. 

2. Income Tax Slabs For Senior Citizens Aged Between 60 and 80 Years

The following are the income tax slabs in the old tax regime for senior citizens aged 60 to 80 years. 

3. Income Tax Slab Rates Under the Old Tax Regime For Senior Citizens Above 80 Years

For super senior citizens aged 80 years and above under the old tax regime, the basic exemption limit is increased to Rs 5 Lakh. 

Taxpayers must note that the income tax slabs under the old tax regime have not changed over many years. 

Are Income Tax Slabs Different For NRIs?

Under both the old and the new tax regimes, the income tax slab rates in India are the same for NRIs and resident individuals. NRIs are taxed in India according to the applicable slab rates based on their total taxable income. 

However, the income tax slab rates remain the same; the availability of basic exemptions and tax deductions differs for NRIs. For example, NRIs are not eligible to claim the higher basic exemption limit that is available to Indian resident senior and super senior citizens, even if the NRI's age qualifies. 

Furthermore, certain tax deductions and allowances generally available to Indian resident taxpayers are not applicable to NRIs. Henceforth, NRIs must not assume that their tax liability will be the same as that of an Indian resident solely on the basis of applicable tax rates, and should carefully evaluate their eligibility for tax exemptions and deductions before choosing the right tax regime. 

What Income Is Taxable For NRIs In India?

Income that is taxable for NRIs is only that which is earned in India, received in India, or deemed to be received in India. Furthermore, income that is earned or received outside India is not taxable in India for NRIs. 

In India, the following income types are taxable for NRIs

• Salary income received for services rendered in India. 
• Rental income earned from a property located in India. 
• Capital gains arising from the sale of Indian assets such as mutual funds, shares, or property. 
• Interest income generated from NRO bank accounts. 
• Business or professional income either accruing or arising in India. 

For NRIs, understanding their taxable income is crucial, as incorrect reporting can lead to excess taxation and compliance issues when filing an Income Tax return in India. 

Tax Free Income Under The Old And New Tax Regime For FY 2025-26

For Indian Residents 

• Salary income up to Rs 12.75 lakhs is tax-free under the new tax regime from FY 2025-26 due to the rebate and standard deduction. 
• Income up to Rs 12 Lakh will be tax-free under the new tax regime, due to the increased rebate from the 2025-26 financial year. 
• However, the aforementioned rebate is not applicable to income taxed at special rates, such as capital gains or online gaming income. 
• Under the old tax regime, income up to Rs 5 lakh is effectively exempt from tax. 

For Non-Resident Indians 

• under the new tax regime, the tax starts at 5% on taxable income above Rs 4 lakh (after the Rs 75,000 standard deduction for salary is applied).
• NRIs must ensure that, for them, section 87A rebate is not applicable; hence, no zero tax up to Rs 12-12.75 lakh.
• For NRIs under the old tax regime, the tax rate starts at 55% on taxable income above 2.5 lakhs. There is no senior exemption or Rebate under section 87A of Rs 12,500 available. 
• The tax deductions under section 80C/80D are available, but the effective tax-free limit remains Rs 2.5 lakh. 

Which Is The Most Beneficial Tax Regime For FY 2025-26?

Which tax regime is most beneficial depends on individuals' finances and the number of tax deductions or exemptions they can claim. 

For a taxpayer with many tax-saving deductions to claim, opting for the old tax regime is more beneficial. 

For taxpayers with limited tax-saving deductions or middle-class income earners, the new tax regime is more beneficial. 

Below is a table showing break-even points for different income levels. If the taxpayer has a tax deduction above the break-even range, the old tax regime would be beneficial; otherwise, choose the new tax regime. 

Taxpayers must plan ahead and choose their tax regime at the beginning of the financial year. 

Taxpayers can assess and estimate their total income, consolidate all deductions, and then calculate their taxable income and total tax payable under both tax regimes to determine which regime is most beneficial. 

The table below shows which income tax regime is most beneficial for a deduction expense of Rs 4.5 lakh. 

Budget 2026 Expectations

For the 2026 budget, considerable slab relaxations are in place, and the tax benefits for this year appear less likely. Because the 2025 budget already provided significant relief to middle-class income earners by introducing relaxed tax slabs and an increased tax-free limit. 

Tax Saving Due To The New Income Tax Slabs For FY 2025-26

The following table showcases the tax savings under the new tax regime. In the table, the income in the first column is taxable income, after deducting all eligible deductions and exemptions under the new regime. 

The Surcharge

The surcharge refers to tax on the tax. Meaning this tax is levied on a small percentage of income, not on income itself. When an individual's total taxable income exceeds Rs 50 Lakh, the surcharge applies. 

The table below provides a clear picture of the surcharge rates for different income groups. 

For dividends and capital gains income under sections 111A, 112A, and 112, the surcharge amount is capped at 15%, even if the income exceeds the Rs 2 crore threshold. 

The Cess 

On the total tax liability, in addition to the income tax and the surcharge, a health and education cess of 4% is levied in all cases. However, the Cess applies whenever income tax is payable. 

The Rebate

As a taxpayer, if your total income is below a certain threshold, the rebate helps reduce your tax liability to zero. 

For taxpayers, the rebate depends on the tax regime they chose for the current year. 

Under the new tax regime, the marginal relief on rebate is available, unlike the old tax regime. 

However, taxpayers, please note that, with effect from financial year 2025-26, the rebate is not available on special tax income, such as capital gains, online gaming income, etc. Additionally, NRI taxpayers cannot claim the rebate benefits. 

Below is a table showing the rebate applicability for fiscal year 2025-26 under the new and old tax regimes. 

The Bottom Line

NRIs and Indian residents, the best tax rate for you depends on your individual income, deductions, and exemptions. A taxpayer who has a high tax deduction to claim can opt for the old tax regime, whereas taxpayers with less tax deduction can opt for the new tax regime. 

Therefore, it is important that you understand the aspects of both the tax regimes correctly. 

However, as an NRI, if you are seeking professional income tax filing services, then Savetaxs is the name to trust. We have been helping NRIs from 90+ countries file their taxes in India, ensuring they are filed in compliance, on time, and error-free. 

Our NRI income tax consultants and experts will provide end-to-end assistance throughout the process, including tax advisory services and more. 

Connect with us as we serve our clients 24/7 across all time zones.