Latest income tax slabs FY 2025-26: Finance Minister Nirmala Sitharaman announced sweeping changes in the new income tax regime, announcing revamped income tax slabs and income tax rates for the salaried taxpayers, individual taxpayers, common man and middle class. The biggest announcement was that people earning up to Rs 12 lakh income will not have to pay income tax!
The three pillars – Democracy, Demography and Demand – form the foundation for our progression towards Viksit Bharat.India’s middle class serves as a crucial driving force for economic advancement. The current administration, led by Prime Minister Modi, recognises the middle class’s vital contribution and capabilities in building the nation, FM Nirmala Sitharaman said.
With effect from assessment year 2026-27, it is proposed that the following rates provided under the proposed clause (iii) of sub-section (1A) of section 115BAC of the Act shall be the rates applicable for determining the income-tax payable in respect of the total income of a person, being an individual or Hindu undivided family or association of persons [other than a co-operative society], or body of individuals, whether incorporated or not, or an artificial juridical person referred to in subclause (vii) of clause (31) of section 2:—
Acknowledging the role of middle class, FM Sitharaman said that they have consistently reduced middle class income taxation burden. Since 2014, the ‘Nil tax’ threshold has seen progressive increases: initially to Rs 2.5 lakh, then to Rs 5 lakh in 2019, and subsequently to Rs 7 lakh in 2023, demonstrating the government’s confidence in middle-class taxpayers.
A significant announcement introduces tax exemption for incomes up to Rs 12 lakh under the new regime (excluding special rate income like capital gains). For salaried individuals, this threshold extends to Rs 12.75 lakh, factoring in the standard deduction of Rs 75,000.
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The comprehensive revision of tax slabs and rates aims to benefit all taxpayers, particularly enabling the middle class to retain more disposable income, which should enhance household spending, savings and investment potential.
The income tax slabs for FY 2025-26 under the old income tax regime continue to be the same:
For regular income up to Rs 12 lakh (excluding special rate income such as capital gains), taxpayers receive a tax rebate alongside benefits from reduced slab rates, effectively eliminating their tax liability.
The impact of these modifications can be quantified through specific examples:
– At Rs 12 lakh income level: Rs 80,000 tax benefit (complete tax exemption)
– At Rs 18 lakh income level: Rs 70,000 tax reduction (30% of previous tax liability)
– At Rs 25 lakh income level: Rs 1,10,000 tax saving (25% of previous tax liability)
