Income Tax Slab for FY 2025-26 (AY 2026-27) – Old vs New Regime

The income tax slab changes for FY 2025-26 make the new regime significantly more attractive for most salaried taxpayers — the effective Rs. 12 lakh tax-free threshold is the headline change. But for those with significant deductions (home loan interest, HRA, investments), the old regime may still result in lower net tax.

This page covers:

• New tax regime slabs for FY 2025-26
• Old tax regime slabs for FY 2025-26
• The Section 87A rebate — how the Rs. 12 lakh zero-tax threshold works
• Standard deduction comparison — old vs new regime
• Which deductions are available under each regime
• Surcharge and cess applicable
• Who should consider the new regime vs old regime
• How income tax slab choice affects home loan tax benefits

India uses a progressive income tax slab system where different portions of your income are taxed at progressively higher rates. The key decision for individual taxpayers in FY 2025-26 is which regime to use — the new default regime (with lower rates but fewer deductions) or the old regime (with higher rates but the full set of exemptions and deductions).

Standard deduction under new regime: Rs. 75,000 for salaried individuals.

Section 87A rebate: Up to Rs. 60,000, applicable where net taxable income (after standard deduction) does not exceed Rs. 12 lakh — effectively making income up to Rs. 12.75 lakh gross (Rs. 12 lakh net after standard deduction) tax-free.
 

Standard deduction under old regime: Rs. 50,000 for salaried individuals.

Key deductions available: HRA exemption, Section 80C (up to Rs. 1.5 lakh), Section 80D (health insurance), Section 24(b) home loan interest (up to Rs. 2 lakh), Section 80E (education loan interest), NPS under 80CCD(1B) (up to Rs. 50,000 additional).

A 4% Health and Education Cess is applicable on the computed tax liability under both regimes, before surcharge. Surcharge applies at higher income levels:

New regime typically better when:

• Total income is under Rs. 12 lakh (effectively zero tax)
• You have minimal deductions — no significant home loan, modest 80C investments, no HRA clai
• You are a senior citizen with limited deductions but benefit from the higher tax-free threshold
   

Old regime typically better when:

• You pay significant home loan interest (above Rs. 1.5 lakh per year)
• You claim substantial HRA in a metro city
• Your total deductions (80C + 80D + 24b + NPS) exceed Rs. 3.5-4 lakh
• Your income is above Rs. 15 lakh and deductions are maximised

Use the Income Tax Department's online comparison calculator at to run your specific numbers before declaring your regime choice to your employer.

The old tax regime's Section 24(b) allows deduction of up to Rs. 2 lakh per year in home loan interest for a self-occupied property — a significant saving for anyone with a sizeable home loan. This deduction is not available under the new regime.

For someone with Rs. 12 lakh income and Rs. 2 lakh in home loan interest (old regime deductible), choosing the old regime can save a meaningful amount in tax even compared to the new regime's lower rates — making the home loan itself a tax efficiency tool under the old regime. Bajaj Finance offers home loans from 7.25% p.a.* with amounts up to Rs. 15 Crore* and tenures up to 32 years. Check your eligibility today.

Understanding the income tax slabs for FY 2025-26 fully, and running both regime calculations, is the most impactful financial planning step a salaried employee can take each year.