FY26 begins today: How new slabs affect your income tax
What's the story
India's new income tax regime comes into effect today, marking a major shift in the country's fiscal policy. The Finance Bill 2025, which was passed by Parliament on March 27, brings several changes to the current tax slabs. For salaried individuals making up to ₹12.75 lakh per annum, there will be no tax liability under this new system owing to a standard deduction of ₹75,000.
Tax adjustments
Changes in basic exemption and rebate thresholds
The new tax regime has increased the basic exemption limit from ₹3 lakh to ₹4 lakh. The rebate limit has also been raised from ₹7 lakh to ₹12 lakh. Finance Minister Nirmala Sitharaman announced these changes during her Budget speech on February 1 for FY26. The new tax structure is expected to offer huge savings to taxpayers in India.
Financial impact
Tax savings under new regime
According to Deloitte India's analysis, a taxpayer earning ₹12 lakh annually will have their tax liability reduced by ₹83,200 under the new regime. Those earning ₹16 lakh will save ₹52,000 post the changes. For high earners such as those earning ₹1 crore or even ₹2 crore annually, the savings could be as much as ₹1,25,840 and ₹1,31,560, respectively, in FY26.
Tax breakdown
New tax rates for FY26
The new income tax rates for FY26 are: No tax on earnings up to ₹4 lakh; 5% on ₹4 lakh-₹8 lakh; 10% on ₹8 lakh-₹12 lakh; 15% on ₹12 lakh-₹16 lakh; 20% on ₹16 lakh-₹20 lakh; 25% from ₹20 lakh to ₹24 lakh and finally, a flat rate of 30% for those earning above ₹24 lakh. These revised slabs were included in Sitharaman's Budget announcement earlier this year.