Income Tax Slabs FY 2025-26 | AY 2026-27

 The income tax slab is used while calculating the tax on income. The tax slab provides rates for different income brackets. In this page, we will discuss the income tax slabs for the financial year 2025-2026

Proposed Income Tax Rates under the New Regime

Current Tax Slabs under the New Tax Regime for FY24-25

Here are the current income tax slabs under the new tax regime for the financial year 2024-25

Income Tax Changes Introduced in Budget 2025

No Tax Liability up to Rs.12 lakh

The most significant change in the propose income tax rates is that taxpayers with income of up to Rs.12 lakh will have no tax liability. The income does not include special rate income such as capital gains. The reduction in capital is due to an increase in a rebate along with reduced slab rates.

Hike in Section 87A Rebate

In the Union Budget 2025, Finance Minister Nirmala Sitharaman announced a hike in the tax rebate under Section 87A. The hike will be effective from assessment year (AY) 2026-2027. The threshold limit of income eligible for a rebate has been raised from Rs.7 lakh to Rs.12 lakh, while the maximum rebate has been increased from Rs.25,000 to Rs.60,000. It is worth noting that the rebates will not be applicable to special rate incomes in the default tax regime.

TDS Threshold Increased

The budget proposed increasing the threshold for tax deducted at source (TDS) on rent from Rs.2.4 lakh to Rs.6 lakh per annum. As a result, the monthly limit for TDS deduction on rent will increase from Rs.20,000 to Rs.50,000. Additionally, the budget has proposed increasing the limit on tax deduction on interest for senior citizens, effectively doubling the limit from Rs.50,000 to Rs.1,00,000.

TCS on Remittances Limit Increased

The limit on the tax collected at source (TCS) on remittances under the Reserve Bank of India (RBI’s) Liberalized Remittance Scheme (LRS) has been increased from Rs.7 lakh to Rs.10 lakh. Additionally, the government has provided relief on TCS on remittances for education(funded through a loan taken from a specified financial institution).

Tax Savings under New Tax Regime

With the changes introduced in the union budget, let’s take a look at how much will an individual tax payer save on taxes under the new tax regime.

Tax on Firms

Although the union budget 2025 did not bring about any changes in the taxation on firms, there are several key updates that provide a boost to companies.

Relief for Startups

The union budget announced a three-year tax holiday for eligible startups within the first 10 years of their operation.

Carry Forward Losses in Mergers

A new company can carry forward losses for the remaining years instead of starting fresh after a merger.

Simplifying TDS and TCS

The union budget simplified the TDS and TCS calculation on the sale of goods by only charging 0.1% TDS on the sale of goods that exceed Rs.50 lakh. This change eliminates the confusion of double taxation. In addition, businesses won’t be penalised for delays in depositing TCS.

Updating Tax Returns

The time limit to update and correct tax filings has been extended from two years to four. Extra tax of 60% will be charged in the third year and 70% in the fourth year.

Transfer Pricing

In the case of related party transactions, a business can use the same transfer pricing for three years to reduce tax disputes.

Taxable Income Sources in India

As a taxpayer, it is important to know the various sources of income that can be taxed.

Salary Income

The income an individual earns as a salary is subject to taxation based on the tax slab and the age of the individual. The pension of an individual after retirement is also subject to taxation based on the tax slab.

Business Income

Business income refers to the profits of a business or profession. The income is taxed only after adjusting the income for the permitted deductions.

Property Income

The income earned through owning and renting out houses is a source of property income. This income is taxable at the respective tax slab rate.

Capital Gains

The profits earned after the sale of an asset such as stocks, gold, or real estate attract capital gains tax. The capital gains tax is levied depending on the duration of the investment.

Other income

Income earned from activities like horse races or lotteries is taxable. However, this income is taxed separately and is not part of the tax slab of the fiscal year.

Articles Related to Income Tax

• Tax in India
• Income Tax Act
• Income Tax Online Payment
• Income Tax Return
• Income Tax Returns Filing Due Date
• TDS - Tax Deducted at Source

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