For the financial year (FY) 2025-26 (Assessment Year 2026-27), the new tax regime has been updated to be the default, featuring a higher rebate that makes taxable income up to ₹12 lakh completely tax-free. Key updates include revised tax slabs starting from ₹4 lakh, a ₹75,000 standard deduction for salaried individuals, and no tax liability for income up to ₹12.75 lakh (including the deduction).
Here's a summary of key changes for the 2025 tax year. The seven federal tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) are now permanent. Standard deductions increased, plus a new “bonus” deduction for older adults. Child tax credit increased to $2,200 per qualifying child.
Union budget 2024 has proposed an increase in the standard deduction under the new tax regime for the FY 2025-26 to Rs. 75,000. An increased standard deduction of Rs. 75,000 is not applicable under the Old tax regime.
Tax-free income in new tax regime (Financial Year 2025-26)
The basic exemption limit has been raised to Rs. 4 lakh, providing immediate relief to taxpayers.
Ans. In the old tax regime, the basic exemption limit for senior citizens is INR 3,00,000/- and for super senior citizens, it is INR 5,00,000/-. In the new tax regime, no income tax is payable upto the total income of INR 7 lakh.
Ans: The tax slabs and rates are different in old and new tax regimes. Various deductions and exemptions are allowed in Old tax regime. The new regime offers lower rates of taxes but permits limited deductions and exemptions.
7 lakhs. This means that under the new regime, individuals with incomes lower than Rs. 7 lakh will not be required to pay taxes if they opt for the new system. This article demystifies how these regulations work and how you can benefit from them.
Every salaried taxpayer automatically gets a ₹75,000 deduction from gross income, reducing taxable income directly. Opt for cost-efficient salary structures such as meal cards, employer NPS contributions, or reimbursements that are not taxable. The government allows switching between the old and new regimes yearly.
For FY 2025–26 (AY 2026–27), the new tax regime applies progressive tax slabs starting with nil tax up to ₹4 lakh, zero tax liability up to ₹12 lakh through rebate, a higher effective tax-free limit for salaried individuals, and fewer exemptions.
To avoid the 22% tax bracket (or any higher bracket), focus on reducing your taxable income through strategies like maxing out 401(k)s and HSAs, deferring bonuses, tax-loss harvesting, smart charitable giving, and strategic asset location, understanding that higher rates only apply to income within that bracket, not your entire income.
Tax changes for 2025, largely driven by the "One Big Beautiful Bill" (OBBBA) Act, introduce significant deductions for seniors, tips, overtime, and auto loan interest, expand the Child Tax Credit, and raise the SALT deduction cap to $40,000, while making several 2017 Tax Cuts and Jobs Act provisions permanent, including the seven tax brackets. Key changes include a $2,200 Child Tax Credit, a $6,000 senior deduction, deductions for qualified tips and overtime, and a permanent standard deduction increase.
When the New Regime Wins:
Salary
This includes your property taxes and either your state income tax or sales tax—whichever is higher. While a $10,000 tax refund might sound like a dream, it's achievable in certain situations. This typically happens when you've significantly overpaid taxes throughout the year or qualify for substantial tax credits.
The IRS in October released new federal income tax brackets for 2026. The inflation-based change increased the income ranges for the two lowest tax brackets by about 4%, and the higher ones by roughly 2.3% compared to 2025.
April 10, 2025, the House adopted the Senate's amended version of the budget resolution, which allows $5.3 trillion in deficit-financed tax cuts (the combination of $3.8 trillion of tax cuts assumed to be “costless” under a current policy baseline plus $1.5 trillion in additional deficits permitted), deficit increases ...
The basic tax exemption limit under the new tax regime has been increased to ₹4 lakh in FY2025-26 from the previous ₹3 lakh in FY 2024-25. This means those with an income up to ₹4 lakh have no tax liability at all if they opt for the new tax regime.
How to Save Tax in India? 10 Smart and Legal Ways for FY 2025-26