Income Tax Slabs FY 2025-26: Zero Tax Up to Rs 12.75 Lakh
Earning Rs 12.75 lakh or less as a salaried employee? Under the new tax regime, you owe exactly zero. Budget 2025 restructured the slabs and pushed the 87A rebate to Rs 12 lakh - the biggest change to the new regime since it launched. Here's everything you need to know for filing your return this year.
New Regime Slabs (Default)
The new regime under Section 115BAC is the default. You don't have to do anything to use it. These slabs were set by Budget 2025 and remain unchanged for FY 2026-27 (Budget 2026 made no changes).
| Taxable Income | Tax Rate |
|---|---|
| Up to Rs 4,00,000 | Nil |
| Rs 4,00,001 to Rs 8,00,000 | 5% |
| Rs 8,00,001 to Rs 12,00,000 | 10% |
| Rs 12,00,001 to Rs 16,00,000 | 15% |
| Rs 16,00,001 to Rs 20,00,000 | 20% |
| Rs 20,00,001 to Rs 24,00,000 | 25% |
| Above Rs 24,00,000 | 30% |
Standard deduction: Rs 75,000 for salaried employees and pensioners. This is applied before the slabs kick in.
Section 87A rebate: If your taxable income is Rs 12,00,000 or less, the entire tax is wiped out by a rebate of up to Rs 60,000. For salaried employees, this means gross salary up to Rs 12,75,000 = zero tax (after the Rs 75,000 standard deduction).
Old Regime Slabs (Opt-in Only)
You must explicitly opt out of the new regime to use these. Salaried employees can switch each year; business taxpayers face a one-time choice.
| Taxable Income | Below 60 | 60-80 (Senior) | Above 80 (Super Senior) |
|---|---|---|---|
| Up to Rs 2,50,000 | Nil | Nil | Nil |
| Rs 2,50,001 to Rs 3,00,000 | 5% | Nil | Nil |
| Rs 3,00,001 to Rs 5,00,000 | 5% | 5% | Nil |
| Rs 5,00,001 to Rs 10,00,000 | 20% | 20% | 20% |
| Above Rs 10,00,000 | 30% | 30% | 30% |
Standard deduction: Rs 50,000 (lower than the new regime). 87A rebate: up to Rs 12,500 for taxable income up to Rs 5 lakh.
How Much Tax Do You Actually Pay?
Let's take a salaried employee earning Rs 15 lakh gross salary, with Rs 2.5 lakh in deductions under the old regime (80C: Rs 1.5L + 80D: Rs 25K + NPS 80CCD(1B): Rs 50K + professional tax: Rs 2,500). No deductions claimed under the new regime beyond the standard deduction.
At Rs 15 lakh with Rs 2.5 lakh in deductions, the new regime saves about Rs 89,000. The old regime only wins when your deductions are significantly higher - typically Rs 4 lakh or more at this income level.
Compare your exact numbers with the Old vs New Regime CalculatorThe 87A Catch - Capital Gains Don't Count
Here's something most slab articles won't tell you. From FY 2025-26, the Section 87A rebate under the new regime does not apply to income taxed at special rates. That means:
- Short-term capital gains under Section 111A (equity, equity mutual funds) - taxed at 20%, no rebate
- Long-term capital gains under Section 112A (equity above Rs 1.25 lakh) - taxed at 12.5%, no rebate
Watch out: If your salary is Rs 10 lakh and you have Rs 50,000 in STCG from mutual fund switches, your salary income gets the 87A rebate but you still owe tax on the STCG. Many taxpayers discovered this the hard way in AY 2025-26 when their expected zero-tax return showed a demand.
Surcharge and Cess
Both regimes add 4% health and education cess on the total tax. Surcharge kicks in at higher income levels:
| Income | New Regime | Old Regime |
|---|---|---|
| Up to Rs 50 lakh | Nil | Nil |
| Rs 50L to Rs 1 crore | 10% | 10% |
| Rs 1 to 2 crore | 15% | 15% |
| Above Rs 2 crore | 25% (cap) | 25% |
| Above Rs 5 crore | 25% (cap) | 37% |
The new regime caps surcharge at 25%. The old regime goes up to 37% above Rs 5 crore. This makes the new regime significantly cheaper at very high incomes.
Quick Regime Decision Guide
- Income up to Rs 12.75 lakh (salaried): New regime wins - zero tax.
- Rs 15-20 lakh, deductions under Rs 3 lakh: New regime likely wins.
- Rs 15-20 lakh, deductions over Rs 4 lakh: Old regime may win. Run the calculator.
- Above Rs 50 lakh: Factor in the surcharge cap - new regime's 25% cap vs old regime's 37%.
Frequently Asked Questions
Under the new regime for FY 2025-26: up to Rs 4 lakh is nil, Rs 4-8 lakh at 5%, Rs 8-12 lakh at 10%, Rs 12-16 lakh at 15%, Rs 16-20 lakh at 20%, Rs 20-24 lakh at 25%, and above Rs 24 lakh at 30%. With the Section 87A rebate, income up to Rs 12 lakh is effectively tax-free.
Yes, for salaried employees. The Rs 75,000 standard deduction brings taxable income to Rs 12 lakh, which qualifies for the full Section 87A rebate of Rs 60,000. This covers the entire tax liability, making it effectively zero tax. However, this only applies to regular income — not capital gains.
No. Budget 2026 made no changes to income tax slabs. The slabs for FY 2026-27 are identical to FY 2025-26 under both regimes. The current slabs were set by Budget 2025.
No. From FY 2025-26 onwards, income taxed at special rates like short-term capital gains under Section 111A and long-term capital gains under Section 112A is excluded from the 87A rebate calculation under the new regime. You will owe tax on these gains even if your total income is under Rs 12 lakh.
The old regime is better when your total deductions and exemptions (80C, 80D, HRA, home loan interest, NPS) exceed roughly Rs 3-4 lakh at income levels of Rs 15-20 lakh, or Rs 4-5 lakh at income above Rs 20 lakh. Below Rs 12.75 lakh, the new regime wins with zero tax.
Under the new regime, surcharge is 10% for income above Rs 50 lakh, 15% for Rs 1-2 crore, and capped at 25% above Rs 2 crore. The old regime has the same rates but the cap is higher at 37% for income above Rs 5 crore. Both regimes also add 4% health and education cess on the total tax plus surcharge.