Income Tax Slabs FY 2025-26: How Your Tax Is Actually Computed
Written by lemmatools Editorial Team · Last updated: · 7 min read
The FY 2025-26 new-regime slabs
- ₹0 – ₹4,00,000: nil
- ₹4,00,001 – ₹8,00,000: 5%
- ₹8,00,001 – ₹12,00,000: 10%
- ₹12,00,001 – ₹16,00,000: 15%
- ₹16,00,001 – ₹20,00,000: 20%
- ₹20,00,001 – ₹24,00,000: 25%
- Above ₹24,00,000: 30% — plus 4% health & education cess on the tax.
Slabs are marginal: only the income inside each band is taxed at that band’s rate. Salaried taxpayers first subtract the ₹75,000 standard deduction from gross salary, and the section 87A rebate then wipes the tax entirely if taxable income is ₹12 lakh or less — which is why "zero tax up to ₹12.75 lakh salary" is the correct soundbite for FY 2025-26.
Worked example: ₹15 lakh taxable income
- First ₹4L: nil.
- ₹4–8L: ₹4L × 5% = ₹20,000.
- ₹8–12L: ₹4L × 10% = ₹40,000.
- ₹12–15L: ₹3L × 15% = ₹45,000.
- Tax ₹1,05,000 + 4% cess = ₹1,09,200. Effective rate: just 7.3% of income.
Notice the gap between the top marginal rate you touch (15%) and the effective rate you pay (7.3%) — slab systems are gentler than they look, and most "30% bracket" earners pay well under 20% effectively.
The ₹12 lakh cliff and marginal relief
At exactly ₹12,00,000 of taxable income the 87A rebate cancels the entire ₹60,000 slab tax. At ₹12,00,001 the rebate vanishes. To stop one extra rupee costing ₹60,000, the law provides marginal relief: tax is capped at the amount by which income exceeds ₹12 lakh, until the normal computation takes over (around ₹12.75L). If your income sits in this band, salary structuring — shifting ₹20,000 into employer NPS under 80CCD(2), for example — has an absurdly high return.
Old regime: when it still matters
The old regime (2.5L/5L/10L slabs at 5%/20%/30%, ₹12,500 rebate up to ₹5L) survives for those who opt in, and it wins only when deductions are heavy: big HRA, ₹2L home-loan interest, maxed 80C and 80D can together beat the new regime above roughly ₹3.5–4L of combined deductions. The income tax calculator computes both side by side — check yearly, because your rent, loan and the slabs themselves all move.
This article is for general information only and is not tax, legal or investment advice. Rules and limits change with Finance Acts and notifications — verify against the official sources above or consult a qualified professional before acting.