The Union Budget 2025 changed the New Tax Regime more than any budget since the regime was introduced. The slabs were widened, a 25% band was added, and the rebate now covers taxable income up to ₹12 lakh. For most salaried people the result is a large cut in tax, and for many it is zero. This post works through what you actually pay at common salary levels.
The New Regime Slabs (from FY 2025-26)
| Taxable income | Rate |
|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Each rate applies only to the part of your income inside that band. Crossing into a higher slab never increases the tax on the income below it.
Why ₹12.75 Lakh Is the Magic Number
Two things work together. First, salaried taxpayers get a ₹75,000 standard deduction under the New Regime, so a salary of ₹12,75,000 becomes taxable income of exactly ₹12,00,000. Second, the rebate cancels the tax completely when taxable income is ₹12 lakh or less. The slab tax on ₹12 lakh is ₹60,000, and the rebate is up to ₹60,000, so the tax payable is nil.
Just above the limit, marginal relief stops a small raise from creating a big tax bill: the tax cannot be more than the income you earn above ₹12 lakh. On a salary of ₹12,85,000 (taxable ₹12,10,000), slab tax would be ₹61,500, but it is capped at ₹10,000, or ₹10,400 with the 4% cess.
Tax at Common Salary Levels
These figures are for a salaried resident below 60, with only the standard deduction, and include the 4% health and education cess.
| Annual salary | Taxable income | New Regime tax | Old Regime tax (no deductions) |
|---|
| ₹8,00,000 | ₹7,25,000 | Nil | ₹65,000 |
| ₹10,00,000 | ₹9,25,000 | Nil | ₹1,06,600 |
| ₹12,75,000 | ₹12,00,000 | Nil | ₹1,87,200 |
| ₹15,00,000 | ₹14,25,000 | ₹97,500 | ₹2,57,400 |
| ₹18,00,000 | ₹17,25,000 | ₹1,50,800 | ₹3,51,000 |
| ₹20,00,000 | ₹19,25,000 | ₹1,92,400 | ₹4,13,400 |
| ₹25,00,000 | ₹24,25,000 | ₹3,19,800 | ₹5,69,400 |
Taking ₹18 lakh as an example: taxable income is ₹17,25,000. Tax is 5% of ₹4 lakh (₹20,000) + 10% of ₹4 lakh (₹40,000) + 15% of ₹4 lakh (₹60,000) + 20% of ₹1.25 lakh (₹25,000) = ₹1,45,000. Adding ₹5,800 cess gives ₹1,50,800, an effective rate of about 8.4% of salary.
Does the Old Regime Still Make Sense?
The Old Regime has higher rates but allows deductions such as 80C investments, health insurance, home loan interest and HRA exemption. The question is how much you would need to deduct before it beats the New Regime. Working it backwards:
- On a ₹15 lakh salary, you would need about ₹5.44 lakh of deductions on top of the standard deduction just to match the New Regime tax of ₹97,500.
- On a ₹20 lakh salary, the break-even is about ₹7.08 lakh of deductions.
Very few people claim that much. Someone with a large home loan, high rent in a metro and full 80C and 80D use might get there; most salaried taxpayers will now pay less under the New Regime. With a typical ₹2 lakh of deductions, a ₹15 lakh salary still pays ₹1,95,000 under the Old Regime, double the New Regime figure.
What These Numbers Leave Out
- Surcharge on income above ₹50 lakh.
- Special rates on capital gains, which are taxed separately from slab income.
- Higher Old Regime exemptions for senior citizens.
- Employer NPS contributions, which remain deductible under the New Regime.
Slabs and rebates are set by each year's Finance Act, so confirm the rules for the year you are filing on the Income Tax Department's e-filing portal. To see your own figure under both regimes, enter your salary in our income tax calculator below.