Old and New Income Tax Regime Explained for Individual Taxpayers

A Comprehensive Overview: New Income Tax Slab Rates in India for 2025-26

The Indian government introduced annual updates to the Income Tax slabs to ensure that the tax system aligns with the economic situation and offers relief to taxpayers. Let’s have a detailed look at the new Income Tax Slab Rates in India for individual taxpayers for the FY 2025-26 (Assessment Year 2025-26).

1. Income Tax Slabs for Individuals (Below 60 Years)

For individual taxpayers under the age of 60, the income tax structure follows a progressive system, where higher earnings are taxed at higher rates.

Old Tax Regime (with Deductions & Exemptions)

Key Deductions Available:

• Deduction under Section 80C for investments in PPF, ELSS, life insurance premiums, etc. (up to ₹1.5 lakh)
• Section 80D for health insurance premium paid
• Section 80CCD (1) upto Rs. 50,000
• Section 24(b) for home loan interest (up to ₹2 lakh)
• HRA (House Rent Allowance) and other exemptions

New Tax Regime (Without Deductions and Exemptions)

The New Tax Regime aims to simplify the tax process by removing deductions and exemptions. The New Regime is optional, and individuals can opt to pay taxes as per the old and new regimes.

Key Features of the New Regime:

• No exemptions or deductions are available, including those under 80C, 80D, etc.
• Tax rates are more straightforward and potentially more beneficial for those who do not have significant deductions to claim.
• The New Regime is aimed at simplifying the income tax return filing process.

2. Income Tax Slabs for Senior Citizens (Aged 60 to 80 Years)

For senior citizens, the government offers higher tax exemptions and relief due to their lower income levels and reduced ability to earn.

Old Tax Regime (with Deductions & Exemptions)

Key Benefits for Senior Citizens:

• Senior citizens are eligible for higher exemption limits and may benefit more from the 80C and 80D deductions.

New Tax Regime (Without Deductions and Exemptions)

3. Income Tax Slabs for Super Senior Citizens (Aged 80 and Above)

Super senior citizens are given the highest tax exemption, making them one of the most favored groups in the tax structure.

Old Tax Regime (with Deductions & Exemptions)

Key Benefits for Super Senior Citizens:

• Higher exemption limit ensures that super senior citizens with modest income pay little to no tax.

New Tax Regime (Without Deductions and Exemptions)

4. Tax Rates for Corporates, HUF, and AOP

The income tax structure for companies, Hindu Undivided Families (HUFs), and Associations of Persons (AOPs) follows a separate tax regime.

5. Important Considerations and Features of the Tax System:

1. Rebate Under Section 87A:
   • Individuals with a taxable income of up to ₹5 lakh are eligible for a rebate of ₹12,500 under Section 87A, which effectively reduces their tax liability to zero.
2. Tax Deducted at Source (TDS):
   • TDS is applicable on specific income sources like salaries, interest, and rental income. Taxpayers can adjust TDS amounts while filing their returns.
3. Tax Filing Deadlines:
   • Individuals must file their tax returns by July 31 of the assessment year (unless extended).
4. Surcharge:
   • A surcharge is levied on taxpayers with high incomes:
     • 10% for income above ₹50 lakh
     • 15% for income above ₹1 crore
     • 25% for income above ₹2 crore
     • 37% for income above ₹5 crore
5. Capital Gains Tax:
   • Short-term and long-term capital gains on investments like stocks, mutual funds, and real estate are subject to taxes with different rates depending on the holding period.

Conclusion

The new income tax slab rates in India for the financial year 2025-26 reflect the government’s focus on promoting ease of tax compliance while offering significant benefits to taxpayers. Individuals have the flexibility to choose between the Old Tax Regime with deductions and exemptions or the New Tax Regime, which offers simpler and more transparent taxation but without any deductions.

It is essential for taxpayers to carefully assess their income and eligibility for exemptions/deductions to choose the regime that is most beneficial for their financial situation. It’s also important to stay updated with the latest tax rules and reforms announced in the Union Budget.

Taxcellent helps you in choosing the appropriate tax regime as well as assistance in filing ITR’s as applicable.