The government introduced significant changes to both old and new tax regimes in Budget 2025. Here is everything you need to know about the new slabs, exemptions and which regime is better for you.
What Changed in Budget 2025?
Budget 2025 brought major relief to the middle class. The new tax regime's basic exemption was raised, and a revised set of tax slabs was introduced. The most significant change: income up to ₹12 lakh is now effectively tax-free under the new regime (thanks to the revised 87A rebate of ₹60,000).
New Tax Regime Slabs FY 2025-26
| ₹0 – ₹4 lakh | Nil |
| ₹4L – ₹8L | 5% |
| ₹8L – ₹12L | 10% |
| ₹12L – ₹16L | 15% |
| ₹16L – ₹20L | 20% |
| ₹20L – ₹24L | 25% |
| Above ₹24L | 30% |
Old Tax Regime Slabs FY 2025-26
| ₹0 – ₹2.5 lakh | Nil |
| ₹2.5L – ₹5L | 5% |
| ₹5L – ₹10L | 20% |
| Above ₹10L | 30% |
Which Regime is Better for You?
The new regime is better if your deductions are less than ₹3.75 lakh. The old regime benefits those with high 80C investments, HRA, home loan interest, and other deductions. Use our Income Tax Calculator to compare your exact situation.
87A Rebate — The ₹12 Lakh Tax-Free Limit
Under the new regime, if your total income is ₹12 lakh or less, you pay zero tax. This is because the 87A rebate (₹60,000) covers the entire tax liability on ₹12 lakh income. Income above ₹12 lakh is taxed normally from the first slab.
Standard Deduction in New Regime
The standard deduction for salaried employees under the new regime is ₹75,000 (increased from ₹50,000 in Budget 2024). This means effective zero-tax limit for salaried employees is ₹12.75 lakh.
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