Income Tax Slab Changes in 2025: How Much Can You Save Under the New Tax Regime

The year 2025 brought significant relief for taxpayers as the government revised income tax slabs and rates under the new tax regime. These changes have made the new regime far more attractive, especially for middle- and higher-income earners, while the old tax regime remained unchanged.

What Changed in the New Tax Regime

One of the biggest changes was the increase in the basic exemption limit to ₹4 lakh under the new tax regime. In addition, the government enhanced the rebate under Section 87A to ₹60,000, allowing individuals with income up to ₹12 lakh from normal sources such as salary or pension to pay zero tax.

For salaried individuals, the benefit is even higher. Due to the standard deduction of ₹75,000, salaried taxpayers with income up to ₹12.75 lakh can effectively pay no tax under the new regime.

Revised Income Tax Slabs for AY 2026–27

The revised tax slabs under the new regime apply from the current financial year (FY 2025–26) and will be used while filing returns for Assessment Year 2026–27. Income up to ₹4 lakh is tax-free, followed by lower and more evenly distributed rates across higher slabs. The highest tax rate of 30% now applies only on income above ₹24 lakh.

How Much Tax Can You Save

The revised slabs lead to meaningful tax savings across income levels. Individuals earning up to ₹12 lakh pay no tax due to the enhanced rebate. Those earning higher also benefit significantly.

A taxpayer with an annual income of ₹20 lakh can save around ₹90,000, while those earning ₹24 lakh or more can save up to ₹1.1 lakh compared to the previous structure. Even at very high income levels, the slab changes help reduce overall tax outgo under the new regime.

New Regime vs Old Regime

Since Budget 2023–24, the new tax regime has been the default option. Taxpayers can still choose the old regime if they prefer to claim deductions such as house rent allowance or other exemptions. However, the new regime offers lower tax rates and simplicity, making it suitable for those who do not rely heavily on deductions.

Read more: PPF in 2026: Key Rules, Interest Rates and Tax Benefits Explained.

Conclusion

The income tax slab changes introduced in 2025 have made the new tax regime more rewarding for a large section of taxpayers. With higher rebate limits, lower rates and reduced complexity, the new regime offers meaningful savings and ease of compliance. Taxpayers should carefully assess their income structure before choosing between the two regimes.

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