Changes in Income Tax Provisions-(Budget 2025-26 Highlights)
1.1 Revised Income Tax Slabs – New Regime (Section 115BAC)
The government has revised the income tax slabs under the new tax regime, increasing the threshold for nil tax liability and adjusting tax rates for different income levels.
Existing vs. Proposed Tax Rates
| Taxable Income (Rs) |
Current Rates (AY 2025-26) |
Revised Rates (AY 2026-27) |
| Up to 3,00,000 |
NIL |
- |
| 3,00,001 to 7,00,000 |
5% |
- |
| 7,00,001 to 10,00,000 |
10% |
- |
| 10,00,001 to 12,00,000 |
15% |
- |
| 12,00,001 to 15,00,000 |
20% |
- |
| Above 15,00,000 |
30% |
- |
| New Slabs (AY 2026-27) |
| Up to 4,00,000 |
- |
NIL |
| 4,00,001 to 8,00,000 |
- |
5% |
| 8,00,001 to 12,00,000 |
- |
10% |
| 12,00,001 to 16,00,000 |
- |
15% |
| 16,00,001 to 20,00,000 |
- |
20% |
| 20,00,001 to 24,00,000 |
- |
25% |
| Above 24,00,000 |
- |
30% |
Key Takeaways:
- The zero-tax limit has been raised from Rs 7 lakh to Rs 12 lakh, reducing the tax burden for middle-income groups.
- No specific tax exemptions for senior citizens in the new regime.
- Taxpayers with business income must stick to their regime choice, while others can switch annually.
- Deductions under standard deduction (Rs 75,000 for salaried individuals), Section 80CCD (employer pension contribution), and Section 80JJAA (employment-linked deduction) are still allowed.
1.2 Comparative Tax Analysis – Current vs. Revised Slabs
| Total Income (Rs) |
Tax as per Old Rates (Rs) |
Tax as per New Rates (Rs) |
Savings (Rs) |
| 8,00,000 |
30,000 |
20,000 |
10,000 |
| 10,00,000 |
50,000 |
40,000 |
10,000 |
| 12,00,000 |
80,000 |
60,000 |
20,000 |
| 15,00,000 |
1,40,000 |
1,05,000 |
35,000 |
| 20,00,000 |
2,90,000 |
2,00,000 |
90,000 |
| 25,00,000 |
4,40,000 |
3,30,000 |
1,10,000 |
1.3 The Old Tax Regime – No Modifications
For taxpayers who opt for the old regime, the existing tax structure remains unchanged.
| Taxable Income (Rs) |
General Taxpayer |
Senior Citizen (60-80 years) |
Super Senior Citizen (80+ years) |
| Up to 2,50,000 |
NIL |
NIL |
- |
| 2,50,001 to 5,00,000 |
5% |
5% |
- |
| 5,00,001 to 10,00,000 |
20% |
20% |
20% |
| Above 10,00,000 |
30% |
30% |
30% |
Important Considerations:
- The new regime is now the default, but taxpayers can opt for the old regime before the return filing deadline.
- Those filing their returns late cannot switch to the old regime.
1.4 Rebate under Section 87A
| Criteria |
Old Tax Regime |
New Tax Regime (AY 2026-27) |
| Income limit for rebate |
Rs 5,00,000 |
Rs 12,00,000 |
| Maximum rebate |
Rs 12,500 |
Rs 60,000 |
| Tax payable after rebate |
NIL |
NIL |
- Marginal relief applies to incomes slightly above Rs 12 lakh.
| Income (Rs) |
Tax Before Relief (Rs) |
Tax After Relief (Rs) |
| 12,10,000 |
61,500 |
10,000 |
| 12,50,000 |
67,500 |
50,000 |
2. Corporate Tax Structure
2.1 Taxation of Firms
- Flat Tax Rate: 30%
- Surcharge: 12% (if income exceeds ?1 crore)
- Cess: 4%
2.2 Tax Rates for Domestic Companies
| Turnover (Rs) |
Tax Rate |
Surcharge |
| Up to 400 Cr |
25% |
- |
| Above 400 Cr |
30% |
7%-12% |
Alternative Tax Options:
| Company Type |
Tax Rate |
Surcharge |
Effective Rate |
| Standard Rate |
25% |
7-12% |
- |
| Opting for Section 115BAA |
22% |
10% |
25.168% |
| New Manufacturing Firms (115BAB) |
15% |
10% |
17.16% |
2.3 Taxation of Foreign Companies
| Income (Rs) |
Tax Rate |
Surcharge |
| Up to 1 Cr |
35% |
NIL |
| 1 Cr – 10 Cr |
35% |
2% |
| Above 10 Cr |
35% |
5% |
2.4 Taxation of Cooperative Societies
| Income (Rs) |
Tax Rate |
| Up to 10,000 |
10% |
| 10,001 - 20,000 |
20% |
| Above 30,000 |
30% |
- Alternative tax options (115BAD & 115BAE):
- General cooperative societies: 22%
- New manufacturing cooperatives: 15%
3. Surcharge & Cess Adjustments
| Income (Rs) |
Surcharge - New Regime |
Surcharge - Old Regime |
| Up to 50 Lakh |
NIL |
NIL |
| 50 Lakh - 1 Cr |
10% |
10% |
| 1 Cr - 2 Cr |
15% |
15% |
| 2 Cr - 5 Cr |
25% |
25% |
| Above 5 Cr |
25% |
37% |
- Cess ("Health & Education Cess"): 4% (applies universally).
- Marginal relief is provided where surcharge is imposed.
Final Thoughts
- Tax burden significantly reduced for middle-class taxpayers.
- Corporate taxation largely unchanged, but manufacturing incentives continue.
- Super-rich taxpayers face high surcharges in the old regime.
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