Tax Slab for Salaried Employees

For salaried individuals, understanding the slab rate for income tax is important for salaried individuals to plan tax expenses efficiently and effectively. However, there are certain things to look out for under the new and old tax regimes as a salaried citizen.

In FY 2025-26 (AY 2026-27), the income tax slab rate remains unchanged, but there are slight differences from the previous budget release of the new regime. This makes the latest iteration of the new regime rather attractive to salaried individuals.

Read more to understand the income tax slabs, deductions, and surcharge rules to help salaried individuals select the most beneficial tax regime.

New Regime Income Tax Slab for Salaried

The New Regime offers a simplified structure with lower slab rates but removes most deductions, except the ₹50,000 standard deduction.

The Indian Government has revised the income tax slabs for the financial year 2025-26 (or the assessment year 2026-27) to provide relief to salaried individuals and stimulate economic growth.

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

For the upcoming financial year, the government has further refined the slabs to provide tax relief and encourage compliance.

New Regime Income Tax Slabs for FY 2024-25 (AY 2025-26)

The Income Tax Slabs for Financial Year 2024-25 (Assessment Year 2025-26) outline the tax rates applicable to individuals based on their annual income.

Under the new regime (Latest budget), after subtracting the ₹50,000 standard deduction, the taxable income is ₹11.5 lakh. While the slab rates apply normally, the effective tax liability is lower compared to the previous budget.

Section 87A Rebate

The new regime FY 2025-26 stands out due to its tax savings potential under the New vs Old Regime. Taxpayers with net taxable income up to ₹7 lakh are eligible for a rebate of up to ₹25,000 under the New Tax Regime.

This means there is no tax liability if your total taxable income (after the ₹50,000 standard deduction) is within this limit. This makes the new tax regime attractive for lower and middle-income earners.

Salaried Income Tax Slab for Old Regime

The Old Tax Regime allows various tax-saving deductions, including 80C, 80D, HRA, and home loan interest deductions, making it beneficial for employees who invest in tax-saving instruments.

Deductions Available in the Old Regime:

• Standard Deduction (₹50,000)
• Section 80C (₹1.5 lakh limit: PPF, EPF, LIC, ELSS, etc.)
• Section 80D (Health Insurance Premiums)
• HRA & LTA Exemptions
• Home Loan Interest Deduction (Section 24B – ₹2 lakh)

New vs Old Regime Tax Slab for Salaried FY 2024-25

The new regime is now the default, but taxpayers still have the option to choose between the two. The Old Regime allows for various deductions and exemptions (such as HRA, LTA, Section 80C, etc.), whereas the New Regime offers lower tax rates but no major deductions.

Here’s a comparison of the income tax slabs under the old and new tax regimes applicable for the financial year 2024–25 (assessment year 2025–26).

Changes in Income Tax Slabs as per New Budget

The Union Budget 2023-24 has introduced some changes in the existing tax regimes at that time. It continues unchanged through FY 2024–25. Some key changes include:

1. Increased the basic exemption limit from ₹2.5 lakh to ₹3 lakh.
2. The slab rates under the new regime have been revised and made easier to transition from one tax range to another.
3. Compared to the old regime, the new regime allows a standard deduction of ₹50,000 to salaried individuals and pensioners.
4. For income up to ₹7 lakh, a full tax rebate is available, effectively with zero tax liability.
5. Effective tax planning under the new regime can extend this zero-tax threshold up to ₹12 lakh, depending on eligible deductions.
6. The New Tax Regime is now the default, though individuals can still opt for the Old Regime by declaration.

Choose Income Tax Slab That Applies to You

Although taxpayers can decide which regime would suit best to their needs, it is best to understand the key takeaways of both upon comparison.

Under the old regime, taxpayers can reduce taxable income through deductions such as:

• Section 80C (up to ₹1.5 lakh)
• Section 80D (health insurance premiums)
• HRA and LTA (based on eligibility)
• Home loan interest (Section 24)

The New Regime offers lower tax rates but no major deductions—with exceptions like:

• Standard Deduction of ₹50,000 (now allowed)
• Employer’s NPS contribution (Section 80CCD(2))

Surcharge on Income Tax for Salaried Employees

A surcharge is an additional tax levied on individuals whose income exceeds certain thresholds. It applies under both tax regimes but with some differences in rates.

The surcharge is not levied on the entire income but on the amount of income tax payable once the income crosses specified thresholds.

Calculate Income Tax Payable Under New Tax Regime

The New Tax Regime follows a simplified slab structure with reduced rates but limited deductions. Understanding how to calculate your income tax under the New Regime for FY 2024–25 is essential for accurate financial planning.

1. 1. Identify your total gross income

For example, let us assume an individual with an income of ₹10,50,000.

1. 1. Subtract standard deduction

Under the new regime for the year 2024-25, the standard deduction is ₹50,000.
Taxable income = ₹10,00,000

1. 1. Apply the New Regime slab rates FY 24-25:

• Total Tax Before Cess: ₹60,000

The individual is taxed 5% on the ₹3 lakh between ₹3 lakh and ₹6 lakh, then 10% on the next ₹3 lakh (₹6–₹9 lakh), and 15% on the last ₹1 lakh (₹9–₹10 lakh).

• 4% Cess: ₹2,400
• Total Tax Payable: ₹62,400

This individual pays ₹62,400 under the New Regime for a taxable income of ₹10 lakh.