The Union Budget 2025 introduced significant changes to income tax slabs and tax rates, benefiting middle-class taxpayers. One of the key highlights of the budget is that no income tax is payable on annual incomes up to ₹12 lakh, thanks to a tax rebate. Understanding how to calculate your income tax correctly can help you plan your finances efficiently.
What Are the New Income Tax Slabs for FY 2025-26?
The new income tax regime has revised tax slabs that determine how much tax an individual needs to pay based on their annual income. Below is the updated tax structure:
| Annual Income | 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% |
With these revised slabs, individuals earning up to ₹12 lakh per annum will not have to pay any income tax. The tax burden has been significantly reduced for those in the ₹4-12 lakh income range, making it more favorable for salaried employees and self-employed professionals.
How to Calculate Income Tax Online for FY 2025-26?
To make tax calculations easier, various online income tax calculators allow taxpayers to determine their tax liability quickly. Here’s how you can calculate your income tax online:
Step-by-Step Process to Use an Income Tax Calculator
- Select Financial Year: Choose FY 2025-26 as the financial year.
- Select Age Group: Since tax rates vary based on age, select the appropriate age bracket.
- Enter Taxable Salary (Old Tax Slabs): If calculating tax under the old tax regime, enter your taxable salary after deducting HRA, LTA, and other exemptions.
- Enter Gross Salary (New Tax Slabs): For the new tax regime, enter your total salary without deducting exemptions.
- Provide Additional Income Details: Add any interest income, rental income, or digital asset earnings (such as cryptocurrency gains).
- Enter Tax-Saving Investments: If using the old tax regime, input your investments under sections 80C, 80D, 80G, 80E, and 80TTA to claim deductions.
- Click on ‘Calculate’: The tax calculator will compare your tax liability under both old and new tax slabs, helping you decide which regime is better for you.
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What Are the Standard Deductions & Tax Rebates for FY 2025-26?
Along with the updated tax slabs, the government has increased the standard deduction to ₹75,000 from ₹50,000. Here’s how this benefits taxpayers:
- Salaried employees can deduct ₹75,000 from their taxable income before calculating tax.
- No tax is payable up to ₹12 lakh due to a tax rebate, reducing the tax burden for middle-class individuals.
- For incomes above ₹12 lakh, tax is calculated based on the new slabs.
Which Is Better: Old Tax Regime vs. New Tax Regime?
| Feature | Old Tax Regime | New Tax Regime |
|---|---|---|
| Tax Slabs | Higher tax rates | Lower tax rates |
| Exemptions Allowed | Yes (HRA, LTA, 80C, 80D, etc.) | No major exemptions |
| Standard Deduction | ₹75,000 | ₹75,000 |
| Best for? | Individuals with high investments | Individuals preferring a simple structure |
If you invest heavily in tax-saving instruments like PPF, ELSS, and NPS, the old tax regime may be better for you. If you prefer lower tax rates without worrying about deductions, opt for the new tax regime.
How to Reduce Your Tax Liability?
If you choose the old tax regime, you can reduce tax liability using various deductions:
- Section 80C: Up to ₹1.5 lakh deduction (PPF, EPF, Life Insurance, ELSS).
- Section 80D: Deduction on health insurance premiums (₹25,000 for individuals, ₹50,000 for senior citizens).
- Section 80E: Deduction on education loan interest.
- Section 80G: Deductions for donations to charities.
- House Rent Allowance (HRA): Tax exemption for salaried individuals living in rented accommodation.
How to File Income Tax Returns (ITR) for FY 2025-26?
Filing Income Tax Returns (ITR) is mandatory for individuals with taxable income. Here’s how you can file your ITR online:
- Log in to the Income Tax e-Filing Portal.
- Select the applicable ITR form based on your income type.
- Enter your income details (salary, business income, capital gains, etc.).
- Claim deductions if filing under the old tax regime.
- Verify tax liability and pay any remaining tax dues.
- Submit your return and e-verify it through Aadhaar OTP or Net Banking.
Filing ITR before the due date (July 31, 2025) ensures compliance and avoids penalties.
Frequently Asked Questions (FAQs)
Who is eligible for a tax rebate under the new tax regime?
Individuals earning up to ₹12 lakh annually qualify for a full tax rebate, meaning they pay zero tax.
What is the penalty for late ITR filing?
A penalty of ₹5,000 applies for late filing if income exceeds ₹5 lakh. If filed before December 31, the penalty reduces to ₹1,000.
Can I switch between the old and new tax regimes every year?
Salaried individuals can switch tax regimes every financial year. However, business owners can switch only once.
What deductions are available under the new tax regime?
The new tax regime does not allow major deductions like HRA, LTA, and 80C investments, but the ₹75,000 standard deduction still applies.
How can I check my income tax refund status?
You can track your refund status through the Income Tax e-Filing Portal under the “Refund Status” section.
What is the difference between taxable income and gross income?
- Gross Income: Total income before deductions.
- Taxable Income: Income after subtracting deductions and exemptions.
Do I need to pay tax on digital assets like cryptocurrency?
Yes, cryptocurrency and digital asset earnings are taxed at 30% plus surcharge and cess, as per the new regulations.
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