As per the latest provisions under the Income Tax Act:
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The New Tax Regime (Section 115BAC) is the default regime from FY 2023–24 onward.
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Individuals can opt for the Old Tax Regime if it is more beneficial.
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Marginal Relief is provided to reduce the burden of surcharge in certain cases.
2. Tax Slabs for FY 2025–26
A. New Tax Regime (Default Regime) – Section 115BAC(1A)
| Income Tax Slabs | Income Tax Rates |
| Up to Rs. 4 lakh | NIL |
| Rs. 4 lakh – Rs.8 lakh | 5% |
| Rs. 8 lakh – Rs.12 lakh | 10% |
| Rs.12 lakh – Rs.16 lakh | 15% |
| Rs.16 lakh – Rs. 20 lakh | 20% |
| Rs. 20 lakh – Rs. 24 lakh | 25% |
| Above Rs. 24 lakh | 30% |
Rebate under Section 87A:
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Available if income ≤ ₹12,00,000
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Rebate = 100% of tax liability
Allowed deductions in new regime:
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Standard deduction (₹50,000)
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NPS under Section 80CCD(2)
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EPF employer contribution
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Family pension deduction (₹15,000 or 1/3 of pension)
B. Old Tax Regime Slabs
| Income Slab | Tax Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Rebate under Section 87A:
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Income ≤ ₹5,00,000 → Rebate of ₹12,500
Deductions Available:
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80C (LIC, PPF, ELSS, etc.)
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80D (Health insurance)
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HRA, LTA, Standard deduction (₹50,000), etc.
3. Surcharge and Marginal Relief (FY 2024–25)
Surcharge Rates:
| Total Income | Old Regime | New Regime (Sec 115BAC(1A)) |
|---|---|---|
| ₹50 lakh – ₹1 crore | 10% | 10% |
| ₹1 crore – ₹2 crore | 15% | 15% |
| ₹2 crore – ₹5 crore | 25% | 25% (capped) |
| Above ₹5 crore | 37% | 25% (capped) |
New Regime restricts maximum surcharge to 25%, unlike 37% under Old Regime.
Marginal Relief Provision:
Marginal Relief ensures that:
Tax (including surcharge) − Tax on threshold ≤ Excess income above threshold
Available for:
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Income just above ₹50 lakh / ₹1 crore / ₹2 crore / ₹5 crore
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Prevents sudden jump in tax liability due to surcharge