New Tax Regime 2025-26
New Tax Regime 2025-26: A Comprehensive Analysis of the Budget
The Union Budget 2025-26 has introduced revised income tax slabs to simplify taxation and boost disposable income. The new tax regime continues to offer lower tax rates but removes various deductions and exemptions. This article provides a detailed breakdown of the latest tax changes and their impact on taxpayers.
Latest Income Tax Slabs for FY 2025-26
The updated income tax slabs under the new tax regime are as follows:
| Annual Income (INR) | Tax Rate (%) |
|---|---|
| 0 - 4 lakh | Nil |
| 4 - 8 lakh | 5% |
| 8 - 12 lakh | 10% |
| 12 - 16 lakh | 15% |
| 16 - 20 lakh | 20% |
| 20 - 24 lakh | 25% |
| Above 24 lakh | 30% |
Key Highlights of the 2025-26 Tax Reforms
1. Standard Deduction and Exemptions
- Standard Deduction of INR 50,000 remains for salaried individuals and pensioners.
- No Deductions under Section 80C (PPF, ELSS, Life Insurance, etc.).
- No House Rent Allowance (HRA) and Leave Travel Allowance (LTA) benefits.
- Higher Tax Rebate: Income up to INR 7 lakh remains tax-free under Section 87A.
2. Corporate Tax Reforms
- Corporate Tax Fixed at 22% for domestic companies.
- Concessional 15% Tax Rate for Startups extended till March 2027.
3. Capital Gains and Investment Taxation
- Long-Term Capital Gains (LTCG) Tax: 10% for gains exceeding INR 1 lakh.
- No Indexation Benefits for debt mutual funds under the new tax regime.
4. Simplified Compliance and Higher TDS Thresholds
- Increase in TDS Limits to reduce the burden on small taxpayers.
- Faster Processing: AI-powered IT return assessment and simplified filing systems.
Comparing the New Tax Regime with the Old Tax Regime
| Feature | Old Tax Regime | New Tax Regime 2025-26 |
|---|---|---|
| Income Tax Slabs | Higher rates, complex slabs | Simplified, lower rates |
| Standard Deduction | Available | Available |
| Section 80C Exemptions | Available | Not available |
| HRA & LTA Benefits | Available | Not available |
| Corporate Tax | 25% for most companies | 22% flat rate |
Who Should Opt for the New Tax Regime?
The new tax regime is ideal for those who do not claim many deductions. If you don’t invest heavily in tax-saving instruments like PPF, ELSS, or NPS, the lower tax rates in the new regime may benefit you. However, the old tax regime might still be preferable if you utilize multiple exemptions.
The New Tax Regime 2025-26 continues to promote lower tax rates but eliminates deductions. Taxpayers must analyze their financial situation before deciding whether to adopt the new regime. The new tax structure offers flexibility and simplicity for those with minimal tax-saving investments.