Income Tax Slabs for FY 2025-26 (AY 2026-27): With Finance Minister Nirmala Sitharaman set to present her ninth consecutive Union Budget on February 1, income tax announcements are in focus for taxpayers.
After last year’s move to make annual income up to Rs 12 lakh tax-free, expectations are building around further relief under the new tax regime in the upcoming Union Budget 2026-27, including a higher standard deduction and deductions for home loan interest and medical insurance premiums.
Also See: Income Tax Slabs 2026
According to sources, two people-first proposals were being discussed for possible inclusion in Budget 2026 under the new tax regime. One, the government was mulling the introduction of a deduction of up to Rs 2 lakh on home loan interest, an incentive that currently exists only in the old tax regime. Two, a proposal was under consideration to allow a deduction of up to Rs 50,000 for medical insurance premiums, a move that could provide relief amid rising healthcare costs.
Taxpayers also expect a standard deduction of up to Rs 1 lakh under the new tax regime, compared with Rs 75,000.
The final decisions of the government will be known tomorrow during FM Nirmala Sitharaman‘s Budget Speech. Meanwhile, here are the current income tax slabs and rates under new tax regime and old tax regime:
Current Income Tax Slabs Under New Regime (FY 2025-26)
| Income Slab | Tax Rate |
|---|---|
| Rs 0 – 4,00,000 | Nil |
| Rs 4,00,001 – 8,00,000 | 5% |
| Rs 8,00,001 – 12,00,000 | 10% |
| Rs 12,00,001 – 16,00,000 | 15% |
| Rs 16,00,001 – 20,00,000 | 20% |
| Rs 20,00,001 – 24,00,000 | 25% |
| Above Rs 24,00,000 | 30% |
Along with the slab revision, the government has introduced a full tax rebate under Section 87A for individuals earning up to Rs 12 lakh, ensuring they don’t pay any income tax for FY 2025-26.
Old Income Tax Regime Slabs
| Income Slab | Tax Rate |
|---|---|
| Up to Rs 2,50,000 | Nil |
| Rs 2,50,001 – Rs 5,00,000 | 5% |
| Rs 5,00,001 – Rs 10,00,000 | 20% |
| Above Rs 10,00,000 | 30% |
The Old Regime allows for popular deductions like 80C (up to Rs 1.5L), 80D (Health Insurance), and Home Loan Interest (up to Rs 2L).
For senior citizens (above 60 years of age and below 80 years), tax exemption limit is Rs 3 lakh. However, those above 80 years (super senior citizens), the income tax exemption limit is Rs 5 lakh.
Old Tax Regime To Be Phased Out?
With the Union Budget 2026 approaching, speculation has intensified over whether the government may finally phase out the old income tax regime and make the new tax regime the sole system for individual taxpayers. While there has been no official indication so far, reports suggest that the government might do away with the old income tax regime in a phased manner.
According to a recent Times of India survey on Budget 2026 expectations, most tax experts said the government may look to eventually do away with the old income tax regime, though the transition is likely to happen in a phased manner.
Meanwhile, the Institute of Chartered Accountants of India (ICAI) has also submitted the Pre-Budget Memorandum 2026 to outline a roadmap for tax reforms aimed at easing compliance, reducing litigation and promoting sustainable growth. It has sought a higher surcharge threshold and deductions for medical insurance premiums and maintenance of dependent persons with disabilities under the new tax regime.
ICAI has sought rationalisation of the income-tax framework, including a higher surcharge threshold and allowing deductions for medical insurance premiums and maintenance of dependent persons with disabilities under the default tax regime. It has also called for clarity on surcharge rates used to compute the Maximum Marginal Rate and on auto-renewal of registrations for small trusts following the extension of validity from five years to 10 years under the Finance Act, 2025.
