The finance minister of India presented the anticipatory budget 2025-26 on 1 February in Parliament, promising a brighter future for salaried and middle-class individuals. While the budget for 2024-2025 does not contribute much to them, this budget looks promising. In her speech, the finance minister stated that individuals earning up to 12 lakhs annually need not pay any income tax to the government, a significant increase from the previous threshold of Rs. 7 lakhs.
This step to boost middle-class households’ disposable income can be bold from the Government as it promises higher consumer spending and supporting economic growth.
Let’s Break Down the New Tax Regime Slab: Budget 2025-26
The New Tax Slab:
| Income Tax Slabs | Tax rate |
| Upto Rs. 4,00,000 | 0% |
| From Rs 4,00,001 To Rs 8,00,000 | 5% |
| From Rs 8,00,001 To Rs 12,00,000 | 10% |
| From Rs 12,00,001 To Rs 16,00,000 | 15% |
| From Rs 16,00,001- Rs 20,00,000 | 20% |
| From Rs 20,00,000 To Rs 24,00,000 | 25% |
| Above Rs 24,00,000 | 30% |
Let’s do a comparison with the old tax-slab rate ( FY 2024-25)
| Income Tax Slab Rate | Tax Rate |
| Upto Rs Rs 3,00,000 | NIL |
| From Rs 3,00,000 to Rs 7,00,000 | 5% |
| From Rs 7,00,001 to Rs 10,00,000 | 10% |
| From Rs 10,00,001 to Rs 12,00,000 | 15% |
| From Rs 12,00,001 to Rs 15,00,000 | 20% |
| Above Rs 15,00,000 | 30% |
Going through the charts, we can conclude on the fact that the new regime tax slabs offer more deductions than the previous year’s tax slab. The old tax slab where charged 30% tax up to the income of Rs 15,00,000, now in the new income tax regime the limit has been exceeded to Rs 24,00,000.
The government has also revised the 87A section. Let’s discuss this.
The Revised Section 87A:
Section 87A comes under the Income Tax Act which states that all individuals are eligible for tax rebates if their income falls under a certain limit. The previous year, this rebate was ₹7 lakhs but in the budget 2025, this rebate has been exceeded to ₹12 lakhs.
Let’s understand this through a table:
| Financial Year | Income Limit | Rebate Amount under Sec 87A |
| Financial Year 2024-25 | Rs 7,00,000 | Rs 25,000 |
| Financial Year 2025-26 | Rs 12,00,000 | Rs 60,000 |
Note: A salaried taxpayer rebate limit for the financial year 2025-26 has been set to Rs 12,75,000 because they are eligible for a standard deduction of Rs 75,000.
Let’s break down how much tax we are saving by following new tax regime 2025.
Tax Saving Breakdown: Savings Differences Between Two Financial Year
Existing tax savings:
| Income Bracket | Tax Savings |
| Rs 3,00,000 to Rs 7,00,000 | Rs 20,000 |
| Rs 7,00,001 to Rs 10,00,000 | Rs 30,000 |
| Rs 10,00,001 to Rs 12,00,000 | Rs 30,000 |
| Rs 12,00,001 to Rs 15,00,000 | Rs 60,000 |
| Total Tax | Rs 1,40,000 |
Proposed tax savings
| Income Bracket | Tax Savings |
| Rs 4,00,001 To Rs 8,00,000 | Rs 20,000 |
| Rs 8,00,001 To Rs 12,00,000 | Rs 40,000 |
| Rs 12,00,001 to Rs 15,00,000 | Rs 45,000 |
| Total Tax | Rs 1,05,000 |
Net Tax Savings: As we follow both tables, the net tax savings will be Rs 35,000 even without the Section 87A rebate.
Summing Up:
The budget for 2025-26 shows a promising future, with rebates extended to 12 lakhs, this budget has been a whistle-blower for many middle-class individuals. The finance minister has stated that this budget has been made mainly to benefit these salaried people. As the 2025-26 financial year offers you a hefty rebate, this rebate does not apply to income from capital gains, crypto, and online gaming.
Now it is up to you which slabs you will be following. But even after that if you are stuck you can take the help of financial advisors like Divadhvik. The professionals and advisors are always there to help you and make the tax-paying process easy and hassle-free.
Will the old tax regime be discontinued in 2025?
Currently, there’s no indication that the old tax regime will be discontinued in 2025. The Indian income tax system offers taxpayers the choice between two regimes: the old regime and the new regime. While the new regime offers lower tax rates, it forgoes several deductions and exemptions available in the old regime. The old regime, while having potentially higher tax rates, allows for deductions like those under Section 80C (investments, insurance), Section 80D (health insurance), and HRA (house rent allowance), among others. This choice allows individuals to select the regime that best suits their financial situation and investment strategy.
How much income is exempted in the new tax slab 2025-26?
For the financial year 2025-26, the new tax regime offers a basic exemption limit of ₹12,00,000. This means individuals with an annual income of up to ₹12,00,000 are not required to pay any income tax under this regime. Beyond this, income is taxed at progressive rates.
What about standard deduction in budget 2025?
The budget of 2025-26 offers tax exemptions till the income of 12,00,000 for middle-class people. Apart from that the salaried person is applicable for a standard deduction of Rs 75,000 which makes it a total of Rs 12,75,000.
