Income Tax Rates and Slabs in India 2025

We all have to deal with taxes because they are a reality of life.  However, being aware of the costs—by income levels, regime selections, and allowances—can significantly impact the outcome. In India, there are two regimes (new and old) offered by the government, with variations in slabs, rebates, and allowance flexibility. This article decomposes the slabs and rates of income tax in India for FY 2025-26 (AY 2026-27), compares the regimes, discusses essential facts/statistics, addresses FAQs, and demonstrates how Cretum Advisory can assist you in making informed tax choices.

1 The Old and New Regimes of Income Tax Rates and Slabs in India 2025

Before examining the facts, a decision must be made. Although the traditional (old) tax regime allows for a lot of deductions and reliefs (such as 80C, 80D, etc.), it also has higher rates and slabs.

The majority of deductions and reliefs are limited or eliminated under the new tax regime (section 115BAC), which also simplifies matters by providing lower slab rates.

Most taxpayers now want the new regime, but the choice is based on your expenditure, investments, and deductions. The recent revision in government Budget 2025 made the new regime more desirable: incomes up to ₹12 lakh are exempt through an increased rebate.

FY 2025-26 Income Tax Slabs (AY 2026-27)

The updated income tax rate slab structure under both regimes is shown below.

2.1 New Regime (FY 2025-26)

Taxable Income (₹)\ Rate\tNotes / Effective Relief

Up to ₹4,00,000\Nil\ No tax at all

₹4,00,001 – ₹8,00,000\5%\

₹8,00,001 – ₹12,00,000\10%\

₹12,00,001 – ₹16,00,000\15%\

₹16,00,001 – ₹20,00,000\20%\

₹20,00,001 – ₹24,00,000\25%\

Above ₹24,00,000\30%

Besides:

• The reason with the bigger Section 87A rebate, your tax burden is often zero if your taxable income is up to ₹12 lakh.
• For salaried individuals, the standard deduction has been raised to ₹75,000.

2.2 Old Regime (FY 2025-26)

These slabs are mostly carried over from earlier years:

Taxable Income (₹)    \Rate\Notes / Surcharge

Up to ₹2,50,000\Nil

₹2,50,001 – ₹5,00,000\5%\

₹5,00,001 – ₹10,00,000\ 20%\Plus ₹12,500 base

Above ₹10,00,000\30%\ Plus ₹1,12,500 base

Surcharges are levied for very high incomes:

• ₹50 lakhs–₹1 crore: 10% surcharge

• ₹1 crore–₹2 crore: 15%

• ₹2 crore–₹5 crore: 25%

• Above ₹5 crore: 37%

Key Takeaways:-

• Individuals with earnings up to ₹12 lakh can claim a Section 87A rebate and avoid paying income tax under the new plan.
• In most scenarios, the new regime results in a tax saving over the old regime, particularly for those with fewer deductions.
• The deduction under the standard is increased to ₹75,000, enhancing relief to salaried taxpayers.
• The top surcharge rate is still 37% (for income above ₹5 crore) under the old tax regime.

Alternative Minimum Tax (AMT) for business/profession taxpayers; it guarantees a minimum tax at 18.5% (plus relevant surcharge/cess) on adjusted total income. PwC Tax

How to Choose Between Old & New Regime?

Here’s what matters most:

Calculate both: For your earnings, make a projection under both regimes with your probable deductions (investments, insurance, mortgage interest, etc.).

• If your deductions are minimal, new regime is usually better.
• If you have big qualified deductions, old regime could yield you more net savings.
• Switching: Some groups (such as business income) may involve remaining in new regime after chosen.
• Surcharge & cess impact: Higher incomes can be subjected to additional burden under previous regime owing to surcharge.

 How Cretum Advisory Assists You?
Cretum Advisory is your partner in dealing with intricate tax regimes so you won’t leave money on the table.

 What we provide:

• Tax planning & optimization (choosing the optimal regime)
• Preparation & filing of income tax returns
• Deductions & relief maximization (80C, 80D, home loan, etc.)
• Dealing with notices, assessments, and appeals
• Advisory for high net worth individuals and business owners
• AMT, transfer pricing, and international tax advisory (where applicable)

How we assist you in specifics:

• We conduct side-by-side analysis for you comparing old vs new regime based on your real finances.
• We plan investments & expenditures to optimize your qualified deductions under the old regime (where available).
• We ensure compliance, penalities avoided, and minimize your audit risk.
• For self-employed individuals and business owners, we manage bookkeeping, TDS, advance tax, and tax projections.
• When there are income tax notice or scrutiny, we represent and defend you.

Frequently Asked Question:-

Q1: Do I embrace the old or new regime?

A Perfect solution is impossible to provide.  Everything depends on your earnings, expenses, investments, and deductions.

Q2: May I change regimes more than once?

A: In most situations, you can no longer switch back to the old regime after you choose the new regime for business or professional profits. For salaried workers, you can elect out of the new regime in the initial return. Always refer to the rules in the applicable year.

Q3: How does the increased 87A rebate function?

A: In the new regime, income up to ₹12 lakh is exempt from payment of tax under Section 87A and one gets a complete rebate, thus making tax payable nil in a majority of cases.

Q4: Is there deduction in the new regime too?

A: Most of the old deductions (80C, 80D, etc.) are being axed or curtailed. The simplicity of the new regime takes away from the number of exemptions.

 Q5: What is surcharge and when is it levied?

A: Surcharge is an extra charge on tax amount for extremely high-income earners. For instance, in the pre-amendment regime, 10% for income ₹50 lakh–₹1 crore; 15% for ₹1–2 crore; 25% for ₹2–5 crore; 37% over ₹5 crore.

Q6: What is AMT and when is it applicable?

A: AMT (Alternate Minimum Tax) makes sure that professionals or firms with large deductions continue to pay a minimum tax—computed on “adjusted total income” at 18.5% (add surcharge/cess).

Q7: Does tax on capital gains, interest, etc. change with regime?

A: No. Capital gains (short-term, long-term), interest income, etc., are taxed according to their respective rules regardless of your regime for ordinary income.

The Final Thought

For careful financial planning, it is essential to understand India income tax rates and slabs. Improvements in the new regime make it preferable for most, particularly those with lesser deductions. However, the old regime is better where deductions are substantial. What is important is to do the calculation.

At Cretum Advisory, we’re here to maximize your tax decisions for compliance and alignment with your financial objectives. You’re salaried, self-employed, or an owner of a business—whatever your situation, we take you through tax projections, regime choosing, filings, and risk management. Like us to produce a tailored tax forecast for you? Just leave your income structure and deductions—I’ll construct a scenario for you.