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

Income Tax Slabs for Super Senior Citizens above 80 Years

New Tax Regime vs. Old Tax Regime: Which Is Better?

Here are some key considerations when choosing between the two for filing income tax returns for the relevant financial year (FY) or assessment year (AY):

• Rates: The new tax regime offers lower rates but fewer deductions, while the old tax regime has higher rates but allows a wider range of deductions.
• Standard Deduction for 2025-26: INR 75,000 is available under both regimes. However, exemptions such as HRA (House Rent Allowance) and deductions like Section 80C are not available in the new regime.
• Planning: The old regime is more suitable for taxpayers who invest heavily in instruments like NPS (National Pension Scheme). The new regime works better for those with limited deductions or simpler tax profiles.
• Default: Under FY 2025-26 tax rules, the new tax regime is the default option. Taxpayers can still opt out, and individuals with business or professional income must file Form 10-IEA to continue with the old regime.

Which Is the Most Beneficial Tax Regime for the Financial Year 2025-2026?

Choosing between the old and new income tax slabs for 25-26 depends on individual financial situations. If your deductions under Section 80C and tax exemptions for the financial year (FY) or assessment year (AY) exceed a certain threshold (roughly INR 1.5 lakh), the old tax regime might be more beneficial. Conversely, if you prefer simpler tax filing and have fewer deductions, the new tax regime offers relief with lower rates and a higher exemption limit.

Shifting Regime: Form 10-IEA Requirements

Taxpayers with business or professional income who wish to switch back to the old tax regime after selecting the new one must submit Form 10-IEA before filing their income tax return. Failure to do so will result in the new regime rules applying by default.

Tax Calculation under the New Regime FY 2025-26 (AY 2026-27)

Here are quick examples for tax liability calculation for 2025-26:

Example 1

A salaried individual earning INR 12 lakhs will benefit from zero tax liability after accounting for the Section 87A (rebate) of INR 60,000.

Example 2

An individual earning INR 25,00,000 with no deductions or exemptions would pay tax as per the new slab rates. Even without deductions, the outgo remains lower compared to the old regime without tax-saving investments.

How to Save Taxes under the New Regime FY 2025-26 (AY 2026-27)?

Tax saving options in 2025-26 include:

• NPS Contribution (Section 80CCD(2): Employer’s contribution remains deductible, lowering taxable income.
• Standard Deduction: An INR 75,000 deduction is available under the new regime, easing income tax for salaried individuals.
• Perquisites: Choosing the right perks and allowances helps optimise tax liability.

Income Tax Changes From 01st April, 2025 (FY 2025-26)

• Slab Rates: Lower tax across most slabs, reducing outflow.
• Rebate: Section 87A rebate raised to INR 60,000, making income up to INR 12 lakhs tax-free.
• TDS (Tax Deducted at Source): Higher TDS threshold limits ease compliance for salaried taxpayers.
• Deductions: Fewer exemptions under the new regime for simpler tax liability calculation.

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

For context, unlike income tax for slabs for 2025-26, the preceding year’s slabs had a lower basic exemption and a smaller rebate. This made the current year’s slabs more taxpayer-friendly, especially for middle-income earners.

Tax Savings Due to New Income Tax Slabs: FY 2024-25 (AY 2025-26) vs FY 2025-26 (AY 2026-27)

The revised slabs have increased tax savings by lowering rates and increasing thresholds, especially benefiting middle-income groups.

Surcharge and Cess

Surcharge rates remain applicable to high earners, ranging from 5% to 37% depending on income levels. A cess (health and education) of 4% is added to the total tax liability.

Rebate

As discussed above, the increased Section 87A rebate for 2025-26 drastically reduces tax liability for the middle class.

Why Income Tax Planning Matters for Personal Loans

Understanding the new income tax slabs for FY 2025-26 and making the right regime choice not only helps reduce your tax outgo but also reflects positively when applying for credit. Correct tax filing strengthens financial credibility, as lenders often review reported income and tax records while assessing personal loan eligibility.

By strategically lowering tax liability and increasing disposable income, borrowers may demonstrate a stronger repayment capacity. Additionally, maintaining accurate filings and financial disclosures ensures smoother verification of personal loan documents, reducing the chances of delays in approval.

Tip: Before applying, use a personal loan eligibility calculator to estimate the loan amount you may qualify for based on your income, existing liabilities, and other factors.

Conclusion

The new income tax slabs for FY 2025-26 (AY 2026-27) are designed to simplify compliance and ease the burden for salaried and middle-income taxpayers. By choosing the right regime and staying on top of available deductions and rebates, you can not only reduce your tax outgo but also strengthen your overall financial profile. This, in turn, can enhance credibility when applying for credit.

If you are looking to bridge expenses or fund future goals, SMFG India Credit offers flexible personal loans of up to INR 10 lakhs*. Check your eligibility and apply today to unlock attractive personal loan interest rates and flexible repayment tenures.