Salaried employee income tax slabs and rates ahead of Budget 2026

In Budget 2025, Finance Minister Nirmala Sitharaman unveiled significant changes to the income tax slabs under the new tax regime, aiming to make it more appealing for taxpayers. However, no new incentives were announced for those continuing with the old tax regime.

Under the new regime, taxpayers earning up to ₹12 lakh annually, roughly ₹1 lakh per month excluding special income like capital gains, will not have to pay any income tax. For salaried individuals, this threshold rises to ₹12.75 lakh due to the standard deduction of ₹75,000. In addition to lower slab rates, a rebate ensures that individuals in this range effectively have zero tax liability.

“The revised structure is designed to substantially reduce the tax burden on the middle class, leaving more money in their hands and encouraging household consumption, savings, and investment,” Finance Minister Sitharaman had said during Budget 2025.

New tax regime (Effective April 1, 2025)

Income up to ₹4 lakh: Nil

₹4–8 lakh: 5%

₹8–12 lakh: 10%

₹12–16 lakh: 15%

₹16–20 lakh: 20%

₹20–24 lakh: 25%

Above ₹24 lakh: 30%

Higher incomes, such as ₹16 lakh, ₹20 lakh, ₹24 lakh, or ₹50 lakh, benefit from reduced slab rates alone, as the rebate is only available up to ₹12 lakh. For example, a taxpayer earning ₹20 lakh now pays ₹2,00,000, down from ₹2,90,000 previously, reflecting a ₹90,000 reduction.

Old income tax regime

Under the old tax regime, taxpayers can still claim several deductions, including investments under Section 80C, home loan interest, and health insurance premiums. However, the higher slab rates can make this option less appealing for those with fewer deductions.

Income up to ₹2.5 lakh: Nil

₹2.5–5 lakh: 5%

₹5–10 lakh: 20%

Above ₹10 lakh: 30%

Finance Minister Nirmala Sitharaman is set to present her ninth consecutive Budget on February 1, marking the third full Budget of the Modi 3.0 regime.