Finance Minister Nirmala Sitharaman presented the Union Budget 2025-26 and announced a host of measures to lift the economy. Many schemes worth crores have been proposed to enhance India’s competitiveness in exports, production, education, agriculture, fishing, ship building and financial services. But what stood out was the ZERO tax announcement on annual income of up to INR 12 lakh for those under the new income tax regime. This will likely benefit 130 million salaried people across India. With this move, they can take home more, allowing them the flexibility to save and spend. The country waited with bated breath to see an announcement like this to deal with inflation and job uncertainty.
Union Budget 2025-26 – Here’s How the Slabs are Under the New Tax Regime
Those who are already under the new tax regime or are planning to do so soon should take note of the slabs that have been rejigged by the government.
| Income Slab (In INR) | Tax Rate |
| 0-4 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% |
When Do These Tax Rates Come into Play?
Annual incomes of up to INR 12 lakh are exempted from taxes. There’s a standard deduction of INR 75,000 too. So, your annual income will have to be more than INR 12.75 lakh for these tax rates to come into play. So, if your annual income is INR 20 lakh, how much tax will you have to pay? Firstly, the standard deduction of INR 75,000 will be debited from your taxable income. So, the taxes will be calculated on INR 19,25,000 (20,00,000-75,000).
| Income Slab (In INR) | Tax Calculation (In INR) |
| 0-4 Lakh | NIL |
| 4-8 Lakh | 5% (5% of 4 lakh = 20,000) |
| 8-12 Lakh | 10% (10% of 4 lakh = 40,000) |
| 12-16 Lakh | 15% (15% of 4 lakh = 60,000) |
| 16-19.25 Lakh | 20% (20% of 3.25 lakh = 65,000) |
| Total Annual Tax Excluding Surcharge | 1,85,000 |
| Total Annual Tax Including 4% Surcharge | 1,92,400 |
| Monthly Annual Tax Including 4% Surcharge | 16,033.33 |
Note – Under the new tax regime, there are no tax deductions available for investments that you find under the old regime.
Should You Transition from Old to New Tax Regime Given the Union Budget 2025-26 Announcements?
Yes, given the massive rise in the income threshold for tax deduction. Even though tax deductions on investments will not be allowed under the new regime, the substantial rise in the income threshold makes a strong case for a switch from the old regime.
We at zarooribaathai.in wish you great savings and a great life ahead.
