In summary

Income tax on a Rs. 25 lakh salary depends on the tax regime and deductions you can claim. For a salaried individual below 60 with no other taxable income, the estimated tax is Rs. 4,23,800 under the new regime and Rs. 5,69,400 under the old regime, including 4% cess.

• The new-regime standard deduction is Rs. 75,000.
• The old-regime standard deduction is Rs. 50,000.
• Taxable income after the standard deduction is Rs. 24.25 lakh under the new regime.
• The new-regime calculation reaches the 30% slab only on the portion above Rs. 24 lakh.
• Eligible life insurance premiums can form part of the aggregate Rs. 1.5 lakh deduction under Section 123, subject to applicable old-regime conditions.

Explore life insurance based on your protection needs. Compare available plans and check the applicable tax treatment before choosing a policy.

The standard deduction is Rs. 75,000 under the new regime and Rs. 50,000 under the old regime. The resulting taxable income is then taxed according to the applicable slabs, followed by 4% Health and Education Cess.

How is tax on Rs. 25 lakh calculated?

Under the new regime, the first Rs. 4 lakh is taxed at Nil. The next slabs are taxed at 5%, 10%, 15%, 20% and 25%, with income above Rs. 24 lakh taxed at 30%.

Because the taxable income in this illustration is Rs. 24.25 lakh, only Rs. 25,000 falls into the 30% slab.

Under the old regime, an individual below 60 years pays Nil tax up to Rs. 2.5 lakh, 5% from Rs. 2.5 lakh to Rs. 5 lakh, 20% from Rs. 5 lakh to Rs. 10 lakh, and 30% above Rs. 10 lakh.

In simple terms:

New regime: Rs. 25,00,000 − Rs. 75,000 = Rs. 24,25,000 taxable income

Old regime: Rs. 25,00,000 − Rs. 50,000 = Rs. 24,50,000 taxable income

The difference between the two basic illustrations is Rs. 1,45,600 after including 4% cess.

Your actual liability can vary if you have other taxable income, eligible deductions, exemptions, special-rate income or different taxable salary components.

The new-regime slabs currently applicable for Tax Year 2026-27 continue from Nil tax up to Rs. 4 lakh to 30% on income above Rs. 24 lakh.

The current tax year also operates under the Income Tax Act, 2025, which applies to income earned from 1 April 2026 onwards. The Income Tax Department's transition guidance states that income earned from 1 April 2026 to 31 March 2027 is governed by the 2025 Act and referred to as Tax Year 2026-27.

What does this mean for a Rs. 25 lakh salary?

For this salary level:

• The new-regime standard deduction is Rs. 75,000.
• Taxable income after that deduction is Rs. 24.25 lakh.
• The first Rs. 4 lakh is taxed at Nil under the new regime.
• Only Rs. 25,000 of the taxable income falls above the Rs. 24 lakh threshold in the new-regime calculation.
• The Section 87A rebate does not apply because the taxable income is above Rs. 12 lakh.

These can include eligible payments towards life insurance, specified investments, health insurance and certain housing-related expenses, subject to the applicable conditions.

The standard deduction under the old regime remains Rs. 50,000 for salaried individuals.

Can life insurance reduce taxable income?

Under Section 123 of the Income-tax Act, 2025, eligible life insurance premiums can form part of an aggregate deduction of up to Rs. 1.5 lakh for specified payments listed in Schedule XV, subject to the applicable conditions. This deduction is not available under the new concessional tax regime.

The Rs. 1.5 lakh limit is an aggregate limit across qualifying payments. It is not an additional Rs. 1.5 lakh deduction reserved only for life insurance.

The revised new-regime slabs were introduced through Budget 2025 and continue for the current tax year. Budget 2026 did not propose another change to the individual rates.

For a Rs. 25 lakh salary, the Rs. 24 lakh new-regime threshold is particularly relevant because the standard deduction brings taxable income to Rs. 24.25 lakh in the example above.

• Use eligible life insurance premiums:

Life insurance can provide financial protection for your family. Eligible premiums can also form part of the aggregate Rs. 1.5 lakh Section 123 deduction under the applicable old-regime provisions, subject to the prescribed conditions.

Tax treatment should be considered alongside the amount of cover, policy term and your protection needs.

• Review health insurance deductions:

Eligible health insurance premiums can provide tax benefits under the applicable old-regime provisions, subject to the prescribed conditions and limits.

• Consider eligible retirement contributions:

Eligible NPS contributions can provide tax benefits under the applicable provisions. The deduction available depends on the nature of the contribution and the regime selected.

• Check housing-related deductions:

Eligible home-loan interest and other housing-related tax provisions may provide deductions or exemptions under the old regime when the relevant conditions are met.

Review the deductions available to you before comparing the final tax payable under both regimes.

Consider an old-regime illustration where you qualify for the full Rs. 1.5 lakh aggregate Section 123 deduction.

Rs. 25,00,000 − Rs. 50,000 standard deduction − Rs. 1,50,000 Section 123 deduction = Rs. 23,00,000 taxable income.

The tax difference in this illustration is Rs. 46,800. It assumes the entire Rs. 1.5 lakh deduction is eligible and that there is no other taxable income or deduction.

The example shows why the old-regime calculation should be based on your actual eligible deductions rather than the gross salary alone.

For Tax Year 2026-27, the new regime has seven slabs. The regular old regime continues with its traditional slab structure for individuals below 60 years.

The Section 87A rebate under the new regime is available to eligible resident individuals with taxable income up to Rs. 12 lakh, subject to the applicable provisions. It does not apply to the Rs. 25 lakh salary examples used here.

How does life insurance fit into the two regimes?

Life insurance has separate tax implications for premium payments and policy proceeds.

Eligible premiums can form part of the aggregate Rs. 1.5 lakh Section 123 deduction under the applicable old-regime provisions. The deduction is not available under the new concessional regime.

For life insurance proceeds, Schedule II of the Income Tax Act, 2025 provides exclusion from total income when the specified conditions are met. These conditions can include premium-to-sum-assured and aggregate-premium limits for certain policies. Amounts received on death are treated separately under the Schedule.

For this reason, life insurance maturity proceeds should not be described as automatically tax-free without checking the applicable policy and statutory conditions.
 

For the basic illustration in this article, the estimated liability is Rs. 4,23,800 under the new regime and Rs. 5,69,400 under the old regime, including 4% cess.

The old-regime liability can change when you have eligible deductions and exemptions. The new regime, in contrast, generally offers fewer deductions but uses a revised slab structure.

Your comparison should therefore use your actual salary details, eligible deductions, exemptions and other taxable income instead of relying only on the gross salary figure.

Income tax on a Rs. 25 lakh salary for Tax Year 2026-27 depends on the tax regime and the deductions available to you. With only the applicable standard deduction, the estimated tax is Rs. 4,23,800 under the new regime and Rs. 5,69,400 under the old regime, including 4% Health and Education Cess.

Budget 2026 did not introduce another change in individual income-tax slab rates. The new-regime slabs continue from Nil up to Rs. 4 lakh to 30% above Rs. 24 lakh, while the Income-tax Act, 2025 governs income earned from 1 April 2026.

At this salary level, compare the two regimes using the deductions and exemptions you are actually eligible to claim. Life insurance can provide financial protection and may also have tax implications under the applicable provisions.