Income Tax Slab 2025-26 — Zero Tax Up to ₹12 Lakh, New Regime Rates
The Union Budget 2025-26 brought the most significant personal income tax relief in years — zero tax for incomes up to ₹12 lakh under the new regime (for salaried employees). Here's a complete breakdown.
New Tax Regime Slabs — FY 2025-26 (AY 2026-27)
| Income Range | Tax Rate |
|---|---|
| ₹0 to ₹4,00,000 | 0% (Nil) |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
These slabs apply for FY 2025-26 (Budget 2025). The new regime is now the default — you need to explicitly opt for the old regime.
How Zero Tax Up to ₹12 Lakh Works
For salaried employees, the calculation is:
- Gross CTC: ₹12,75,000
- Less Standard Deduction: −₹75,000
- Taxable Income: ₹12,00,000
- Tax as per slabs: 0% on ₹4L + 5% on ₹4L + 10% on ₹4L = ₹0 + ₹20,000 + ₹40,000 = ₹60,000
- Section 87A Rebate: −₹60,000
- Net Tax Payable: ₹0
The Section 87A rebate of ₹60,000 exactly offsets the tax on ₹12 lakh — making effective tax zero. This only works if taxable income ≤ ₹12 lakh.
Tax Calculation Examples
Example 1: ₹10 LPA CTC (Salaried)
| Item | Amount |
|---|---|
| Gross CTC | ₹10,00,000 |
| Standard Deduction | −₹75,000 |
| Taxable Income | ₹9,25,000 |
| Tax: 0% on ₹4L + 5% on ₹4L + 10% on ₹1.25L | ₹20,000 + ₹12,500 = ₹32,500 |
| Section 87A Rebate (taxable income ≤ ₹12L) | −₹32,500 |
| Net Tax | ₹0 |
Example 2: ₹15 LPA CTC (Salaried)
| Item | Amount |
|---|---|
| Gross CTC | ₹15,00,000 |
| Standard Deduction | −₹75,000 |
| Taxable Income | ₹14,25,000 |
| Tax: 0% on ₹4L + 5% on ₹4L + 10% on ₹4L + 15% on ₹2.25L | ₹20,000 + ₹40,000 + ₹33,750 = ₹93,750 |
| Section 87A Rebate | ₹0 (taxable income > ₹12L) |
| 4% Health & Education Cess | ₹3,750 |
| Net Tax | ₹97,500 |
Example 3: ₹20 LPA CTC (Salaried)
| Item | Amount |
|---|---|
| Taxable Income (after std deduction) | ₹19,25,000 |
| Tax as per slabs | ₹2,68,750 |
| 4% Cess | ₹10,750 |
| Net Tax | ₹2,79,500 |
Old Tax Regime Slabs — FY 2025-26 (Unchanged)
| Income Range | Tax Rate |
|---|---|
| Up to ₹2,50,000 | 0% |
| ₹2,50,001 to ₹5,00,000 | 5% |
| ₹5,00,001 to ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Old regime allows deductions (80C, HRA, LTA, home loan) but has higher rates. Section 87A rebate in old regime: up to ₹12,500 (for income up to ₹5 lakh).
Surcharge — High Income Earners
| Income Range | Surcharge (New Regime) |
|---|---|
| ₹50L to ₹1 Crore | 10% |
| ₹1 Crore to ₹2 Crore | 15% |
| ₹2 Crore to ₹5 Crore | 25% |
| Above ₹5 Crore | 25% (capped) |
When to Choose Old Regime
Old regime can be better if your total deductions are very high:
- ₹1.5 lakh in 80C
- ₹25,000–₹50,000 in 80D (health insurance)
- ₹1.5–₹2 lakh in HRA exemption
- ₹2 lakh in home loan interest (24b)
If total deductions cross ~₹3–4 lakh, old regime may save more tax. For most employees with standard deductions only, the new regime is better.
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