Income Tax Slabs FY 2025-26: Complete Guide for Individuals & Businesses

The Union Budget 2025 has introduced significant changes to the income tax slabs under the new tax regime, offering relief to individual taxpayers and businesses alike. Understanding these changes is crucial for effective tax planning for FY 2025-26 (AY 2026-27).

Under the new tax regime, the basic exemption limit has been raised, allowing individuals with income up to Rs 12 lakh to pay zero tax, thanks to the enhanced Section 87A rebate. The revised slab structure is designed to simplify taxation while incentivizing compliance.

For salaried individuals, the standard deduction of Rs 75,000 is now available under the new regime, along with the NPS employer contribution deduction of up to 14% of basic salary. These changes make the new regime more attractive compared to previous years.

For businesses, the corporate tax rate remains stable, but startups incorporated after April 1, 2025, can avail a 100% tax holiday on profits for three consecutive assessment years within the first ten years of incorporation, subject to meeting eligibility criteria.

Key deductions still available include: Section 80CCD(2) for NPS employer contribution, Section 80TTA for savings account interest (up to Rs 10,000), and Section 80G for donations to specified funds. However, most other deductions like 80C, 80D, and HRA exemption are only available under the old tax regime.

For NRIs, the tax slabs remain the same as resident individuals under the new regime, but TDS rates on certain incomes continue to apply. It is important for NRIs to evaluate their residential status each year to determine the applicable tax treatment.

Tax planning should be done at the start of the financial year rather than the end. Evaluate both old and new regimes using your actual income and deduction data, then choose the one that results in lower tax liability. A Chartered Accountant can help you make the right choice and ensure full compliance.