Income Tax Slabs Union Budget 2025: Understanding the Changes in New & Old Tax Regimes

The Union Budget 2025-26 has brought significant changes to the new tax regime (NTR) while keeping the old tax regime (OTR) unchanged. This move aims to provide relief worth ₹1 lakh crore to the middle-class taxpayers in India.

One of the most notable changes includes the income tax exemption limit being raised to ₹12 lakh under the new regime, compared to ₹7 lakh earlier. This revision is expected to benefit over one crore taxpayers and ease the overall tax burden.

To help taxpayers understand the changes better, we have detailed the latest income tax slabs, standard deductions, exemptions, and rebates under both tax regimes.

Budget 2025: Basic Exemption Limit - New Regime Vs Old Regime

The government has increased the basic exemption limit under the new tax regime from ₹3 lakh to ₹4 lakh in Budget 2025-26. However, under the old tax regime, the exemption limit remains unchanged at ₹2.5 lakh. Special provisions for senior citizens (aged 60-80 years) and super senior citizens (above 80 years) under OTR are:

• Senior citizens: ₹3,00,000

• Super senior citizens: ₹5,00,000

Key Takeaway:

• New tax regime exemption limit: ₹4 lakh

• Old tax regime exemption limit: ₹2.5 lakh (₹3 lakh for senior citizens, ₹5 lakh for super senior citizens)

Standard Deduction Limit: New Vs Old Regime

The standard deduction is a fixed amount deducted from a taxpayer’s income before tax is calculated.

• Under the new tax regime, the standard deduction remains ₹75,000.

• Under the old tax regime, it is ₹50,000.

Example Calculation:

If a person earns ₹12,75,000 annually, then:

• Under NTR, ₹75,000 will be deducted from ₹12,75,000, making the taxable income ₹12,00,000.

• Under OTR, ₹50,000 will be deducted, reducing taxable income accordingly.

Rebate Under New Tax Regime Vs Old Tax Regime

A tax rebate is a form of relief where taxpayers get a discount on their tax liability under Section 87A of the Income Tax Act, 1961. The Budget 2025 has significantly revised the rebate structure:

• New tax regime: The rebate limit is now ₹60,000 for incomes up to ₹12,00,000 (previously ₹25,000 for incomes up to ₹7,00,000).

• Old tax regime: The rebate remains ₹12,500 for incomes up to ₹5,00,000.

This means that individuals earning up to ₹12.75 lakh (including the standard deduction) will pay zero tax in FY2025-26.

Deductions: Old Vs New Tax Regime

The old tax regime allows taxpayers to claim deductions under various sections, while the new regime does not permit deductions beyond the standard deduction.

Deductions under Old Tax Regime:

• Section 80C: Up to ₹1,50,000 for investments in PPF, ELSS, LIC, etc.

• Section 80D: Tax benefits on health insurance premiums.

• Section 24(b): Deduction on home loan interest (up to ₹2,00,000).

• HRA & LTA exemptions available.

Budget 2025: Income Tax Slabs for FY2025-26 - NTR Vs OTR

New Tax Regime (NTR) Income Tax Slabs

Old Tax Regime (OTR) Income Tax Slabs

The old tax regime continues to offer the same slabs as previous years for both FY2024-25 and FY2025-26.

Implementation Timeline: When Will These Changes Take Effect?

The new tax regime changes introduced in the Union Budget 2025-26 will take effect from April 1, 2025, for FY2025-26. However, the old tax regime remains unchanged, making it applicable for both FY2024-25 and FY2025-26.

Current Financial Year (FY2024-25) - New Tax Regime Slabs:

Conclusion

The Union Budget 2025-26 has prioritized middle-class tax relief by tweaking the new tax regime while keeping the old tax regime unchanged. The hike in tax exemption limits, along with higher rebates, ensures that many taxpayers, especially those earning up to ₹12.75 lakh annually, will pay zero tax in the next financial year. The changes aim to boost disposable income and enhance consumer spending, which is expected to drive economic growth.