Income Tax Slab for Salaried Persons: FY 2025-26 Rates and Deductions

• New regime is default for FY 2025-26; salaried individuals pay zero tax up to Rs. 12.75 lakh gross (Rs. 12 lakh net after the Rs. 75,000 standard deduction)
• New regime slabs: nil to Rs. 4 lakh, then 5%/10%/15%/20%/25% in Rs. 4-lakh steps up to Rs. 24 lakh, 30% above
• Old regime standard deduction for salaried individuals: Rs. 50,000 (unchanged)
• Employers deduct TDS on salary under Section 192, month by month across the financial year, based on your declared regime
• Form 16, issued by your employer by 15 June each year, is the primary document salaried taxpayers use to file their return
• Bajaj Finance home loan interest up to Rs. 2 lakh a year under Section 24(b) remains available only under the old regime — a factor worth weighing before you declare your regime to your employer for FY 2025-26.

India taxes salaried individuals through a progressive slab system — each portion of your income above a threshold is taxed at a progressively higher rate, rather than your entire income being taxed at one flat rate.

This choice is not permanent — as a salaried employee, you can switch regimes every financial year when you file your return, even if you declared a different regime to your employer for TDS purposes during the year.

The Finance Act 2025 restructured the new regime slabs effective FY 2025-26, and these same rates continue unchanged for FY 2026-27 under the Income Tax Act, 2025.

A 4% Health and Education Cess applies on top of the computed tax. As a salaried individual, you get a Rs. 75,000 standard deduction from your gross salary before these slabs apply, and a Section 87A rebate of up to Rs. 60,000 if your net taxable income does not exceed Rs. 12 lakh — the combination of which is why gross salary up to Rs. 12.75 lakh results in zero tax payable.

The old regime is unchanged for FY 2025-26 and remains available to any taxpayer who actively opts for it while filing.

Under the old regime, salaried individuals get a Rs. 50,000 standard deduction — lower than the new regime's Rs. 75,000 — but can additionally claim HRA exemption, Section 80C investments up to Rs. 1.5 lakh, Section 80D health insurance premiums, and Section 24(b) home loan interest up to Rs. 2 lakh a year. Section 87A gives a Rs. 12,500 rebate under the old regime for net taxable income up to Rs. 5 lakh, a materially lower threshold than the new regime's Rs. 12 lakh.

Unlike a self-employed taxpayer who pays advance tax directly, a salaried employee's tax is deducted at source by the employer, month by month, under Section 192 of the Income Tax Act.

1. Regime declaration: At the start of the financial year (or when joining a new employer), you declare which regime you want your employer to use for TDS calculation.
2. Investment declaration: If you declare the old regime, you submit proof of planned investments and exemptions (80C, HRA, home loan interest) to your employer, usually in two rounds — a provisional declaration and a final, document-backed declaration later in the year.
3. Monthly deduction: Your employer estimates your full-year tax liability based on your salary structure and declared regime, then deducts roughly one-twelfth of that liability from each month's salary.
4. Form 16 issuance: By 15 June following the end of the financial year, your employer issues Form 16 — a certificate detailing your salary, deductions claimed, and TDS deposited with the government.
5. Return filing: You use Form 16 as the primary reference document to file your Income Tax Return, reconciling any difference between TDS deducted and your actual final liability.

A mismatch between your regime declaration to your employer and the regime you eventually choose while filing your return is not a problem — you can switch at filing time, and any excess TDS deducted is refunded.

Consider Priya, a 32-year-old product manager in Bengaluru earning Rs. 15 lakh a year (Rs. 1.25 lakh a month), with a CIBIL score of 778, evaluating a home loan for a Rs. 65 lakh flat.

Priya gets no benefit from her upcoming home loan interest under the new regime. Under the old regime, even with Section 80C and Section 24(b) both claimed, her taxable income of Rs. 11 lakh is taxed at steeper base rates than the new regime — so her old-regime liability still comes out higher in this case. Priya's own comparison, redone each year against her actual investment and interest figures, is the only reliable way to choose — a generic recommendation does not hold for every income level.

A few deductions apply specifically because you draw a salary, distinct from deductions available to any taxpayer:

• Standard deduction: Rs. 75,000 (new regime) or Rs. 50,000 (old regime), available automatically without needing to submit any proof
• House Rent Allowance (HRA): Old regime only — exempt up to the least of actual HRA received, rent paid minus 10% of basic salary, or 50%/40% of basic salary for metro/non-metro cities
• Leave Travel Allowance (LTA): Old regime only — exemption for two journeys within India in a block of four calendar years, against actual travel cost
• Employer's NPS contribution: Available under both regimes — up to 14% of basic salary under Section 80CCD(2), a deduction that does not require any of your own money and applies on top of the standard deduction

For salaried individuals with a home loan, Section 24(b)'s Rs. 2 lakh interest deduction is old-regime-only, which makes the regime choice a genuinely different calculation for a homeowner compared to a salaried employee with no property loan.

If a home loan is part of your near-term plan, factor Section 24(b)'s old-regime-only interest deduction into your regime choice before you declare it to your employer for the year.

Use the Home Loan Tax Benefit Calculator to see how Section 24(b) and Section 80C affect your specific tax outcome under each regime before deciding.