New tax regime slabs explained: a complete guide for taxpayers

31/08/26

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The new tax regime slabs were introduced by the government to simplify the tax-paying process. The new regime gives lower tax rates with fewer deductions and exemptions, thereby reducing the work of tax calculation. Individuals have the option of opting for the old or new tax regimes based on their income level.

However, it is essential to know about the distinction between tax exemption, tax deductions, and lower tax rates before filing income tax returns. It is also important to note that the new tax regime does not provide many of the tax deductions offered under the old tax regime. Meanwhile, Section 80G in the Income Tax Act is one of the most important deductions that remains unchanged in the old income tax slab. Here is a quick guide regarding the new income tax slab, tax exemption, eligibility criteria, etc. 

What Is the New Tax Regime?

The new tax system is a modern tax system that has been developed based on the Income Tax Act, an alternative to the previous tax system in India. The main purpose of introducing this new tax regime is to make the tax calculation process simpler with the revised tax rates and fewer deductions and exemptions.

With the new tax regime, the total income is divided into different slabs, and each slab has a specific tax rate. This is because the tax is calculated on the portion of income that comes within the range of the new tax slabs. Under the old tax regime, taxpayers can claim deductions and exemptions to reduce their payable income tax. However, with the new tax regime, one might not get the same deductions and exemptions as compared to the old tax regime. 

Thus, it is wise to carefully compare both regimes before paying tax, considering the one that works best for the person’s financial situation.

New Tax Regime Slabs Explained

Tax rates are calculated against different income levels in the new tax slabs. There is a tax rate that applies to each of the income slabs, making it possible to get the tax rate that will apply to a particular taxable income level.

The latest tax slabs under the new tax regime are:

These tax slabs will be applicable irrespective of age. It does not matter whether you are younger or older; there is a different portion of taxable income taxed as per the applicable new tax regime slab. The new tax regime is chosen by salaried individuals, Hindu Undivided Families (HUFs), AOPs and BOIs, and artificial juridical persons. 

As the rate slabs and tax policies can always be changed, it is a must to check the tax rates before filing the income tax return. 

Income Tax Slab Rates 

The above-mentioned slab-wise tax rates explain the tax you have to pay based on the increase in income. If your income rises to another slab, the slab-wise tax is applied to the amount of income in the new slab only and not to the rest of your income. The new income tax slab also includes the rebate under Section 87A, which means you may not have to pay any tax if your income is up to 12 lakh per annum or subject to eligibility.

Income tax under the new tax regime is calculated by dividing your total income according to the applicable slabs, and then each portion is applied corresponding to the new tax rate. 

For example, if your total income is ₹20 lakh a year, it is divided into different tax slabs. Every portion of that amount is taxed according to that slab and finally combined as your final tax payable.

Who Can Opt For The New Tax Regime?

• Employees: Persons getting paid a regular salary in private or government employment, and senior citizens who are still working. 
• Independent earners: Self-employed persons such as freelancers who make money from their expertise or services.
• Business owners: Those who own a business are open to opting for the new regime according to tax regulations. 
• People comparing tax options: taxpayers who wish to compare the advantages of low tax rates against deductions in the old regime.

Tax Exemption In The New Tax Regime

The tax exemption in new tax regime means certain parts of your salary or income may be exempt from tax as allowed by the tax rules. While the old tax regime allowed many tax exemptions and deductions, the new tax slabs reduce the most benefits. 

However, some selected benefits still remain available under applicable provisions, and it is important to review your salary structure before deciding on a regime. This will help you know which portions of your salary are taxed under the new system, as well as which tax deductions are no longer available to you.

Exemptions Available Under the New Tax Regime

• Standard Deduction: Salaried employees can claim a standard deduction of up to Rs. 75,000.
• Employer’s Contribution to NPS: An exemption of up to 14% of salary towards the employer’s contribution to NPS is available.
• Exemption for Family Pension: ₹25,000, or one-third of the amount of pension, whichever is less, is exempted under the new tax regime.
• Transport and Conveyance benefits: Allowed in case of transport allowance to persons with disabilities. 

Exemptions Not Available Under the New Tax Regime

• • Leave Travel Allowance (LTA): Not exempted under Section 10(5).
  • House Rent Allowance (HRA): No HRA exemption is available under Section 10(13A).
  • Most Chapter VI-A deductions: Most deductions under Chapter VI-A are not available under the new tax regime.
  • Interest deduction on self-occupied home loans: No tax benefit in respect of home loan interest is allowed to be deducted for self-occupied property under the new scheme. 

Old Tax Regime vs. New Tax Regime

The main difference between the old and new tax regimes is the tax rates. The old tax regime has higher tax rates, while the new tax regime slabs are lower in comparison. Let us discover the major differences between India’s new and old tax regimes.

The old tax regime provides many tax deductions and exemption benefits, while tax exemptions in the new tax regime are only available in some cases. It totally depends on the individual’s financial status, as well as income level and which type of tax regime suits the taxpayer. 

However, before choosing either regime, some factors must be considered:

• Income
• Salary structure
• Available deductions
• Exemption eligibility
• Tax liability

How To Choose The Right Tax Regime

When deciding on which tax regime to choose, it is important to not only consider the tax rate but also to analyse both options based on your salary, tax benefits, and finally, the taxable amount you need to pay.

• Compare total taxable income under both regimes—Calculate what your taxable income is under both regimes.
• Evaluate available deductions and exemptions – Identify what deductions and exemptions you will be able to claim with each option.
• Calculate final tax liability – Once you have found out all the above, calculate your total tax under both tax regimes.
• Consider long-term financial planning—Think about your future earnings and financial plans while making your choice
• Review changes announced in every Union Budget—The tax laws and tax rates can be revised every year through the Union Budget; keep a check on it before making your decisions.

Common Mistakes Taxpayers Should Avoid

• Selecting a regime without comparing tax liability: Make sure to have a look at the tax liability under each system.

• Ignoring available exemptions and deductions: Closely consider what exemptions and deductions are available to claim.

• Missing eligible documentation: Have all required documentation prepared beforehand.

• Incorrect income reporting: Make sure all income proof is reported properly.

• Not reviewing annual tax updates: Look at the current year’s tax requirements before filing ITR.

Why Staying Updated with Income Tax Rules Matters

The tax laws related to income tax change with each Union budget and can affect the new tax regime slabs, tax exemptions, and tax rebates. Monitoring these changes will help you calculate your taxes correctly without making any errors while filing.

Monitoring the latest tax provisions will help you plan your finances more efficiently and make better tax decisions. It will help you understand any changes in tax exemptions that may apply to you.

Final Thoughts

Understanding the new tax regime slabs would definitely help you make informed financial decisions. As both regimes have different tax rates, deductions, and tax exemptions, it is essential to compare both regimes thoroughly to get the most benefits. You can also use the official income tax calculator or consult a professional CA for smooth ITR filing. Further, staying up-to-date with new tax regulations can assist you in future planning and help you better manage your money.

FAQs

1. What exemptions are available under the new tax regime in India?

The exemptions under the new tax regime in India cover Section 10(10), Section 10(10AA), Section 10(10C), Section 10(14), and Section 10(14)(i).

2. Is it possible to switch between the old and new tax regimes?

Yes, you can switch between the old and new tax regimes while filing your income tax return. However, the rules may differ for entrepreneurs and individual professionals.

3. Can I claim the section 80G deduction under the new tax regime?

Section 80G deduction cannot be claimed under the new tax regime. Eligible donations may qualify for a deduction under Section 80G if the taxpayer chooses the old tax regime and meets the applicable conditions.

4. Which tax regime is better – old or new?

There is no single option that is suitable for every taxpayer. The new regime may suit taxpayers who prefer revised slab rates and fewer deductions, while the old regime may suit those who can claim eligible deductions and exemptions.

5. Is it compulsory for every taxpayer to go for the new tax regime?

Eligible taxpayers can choose between the applicable tax regimes based on their circumstances and the relevant tax rules.

Gaurav Sharma

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