New Tax Regime Slabs & Rules (FY 2025-26): The Complete Taxpayer Guide

Overview of the Revised New Tax Regime

The Union Budget has further consolidated the New Tax Regime as the default tax structure in India. With expanded slab widths, an enhanced standard deduction for salaried individuals, and an increased threshold for full tax rebate under Section 87A, the regime now provides substantial tax relief across middle- and upper-middle-income brackets without requiring mandatory lock-in investments.

Income Tax Slabs for FY 2025-26 (AY 2026-27)

Under the New Tax Regime (Section 115BAC), individual taxable income is taxed according to the following simplified slab schedule:

Standard Deduction & ₹12 Lakh Rebate under Section 87A

Two critical provisions make the New Regime particularly attractive for salaried professionals:

• Enhanced Standard Deduction: The flat standard deduction for salaried employees and pensioners stands at ₹75,000 (compared to ₹50,000 in the Old Regime).
• Section 87A Full Tax Rebate: If your net taxable income after standard deduction does not exceed ₹12,00,000, the entire tax liability is rebated to ₹0 under Section 87A.
• Effective Tax-Free Salary: A salaried employee earning up to ₹12,75,000 gross CTC pays exactly ₹0 Income Tax under the New Regime.

Employer NPS Contribution Limit Increased to 14%

Under Section 80CCD(2), employer contributions to the National Pension System (NPS) on behalf of employees are allowed as a direct deduction under the New Tax Regime. The deduction cap for non-government private sector employees has been raised to 14% of basic salary + DA (matching central and state government employee parity).

Who Should Choose the New Tax Regime?

The New Tax Regime is mathematically superior for:

• Salaried professionals with annual earnings up to ₹12.75 Lakhs (100% tax-free).
• Taxpayers who do not have high home loan interest (Section 24b) or substantial HRA claims.
• Individuals who prefer high take-home liquidity rather than locking up ₹1.5 Lakhs in 5-year tax-saver instruments.

Action Plan & Filing Support with CP Associates

Before submitting your declaration to your employer or filing your annual ITR, run an exact comparative simulation. Our CA practice in Delhi reviews your Form 16, AIS, and investment profile to ensure you select the regime that leaves the maximum cash in your hands.