The Default Tax Regime FY 2025-26 (also called the New Tax Regime 2025) is applicable under Section 115BAC(1A) of the Income Tax Act.
From FY 2023-24 onwards, the new tax regime became the default option. This means for Financial Year 2025-26 (Assessment Year 2026-27), your income tax will automatically be calculated under this regime unless you choose the old regime.
In this detailed guide, we explain:
- Income Tax Slabs for FY 2025-26
- Deductions not allowed in new tax regime
- Detailed tax calculation examples
- Old vs New Tax Regime comparison
- Which regime is better for you
🔹 What is Default Tax Regime under Section 115BAC(1A)?
The Default Tax Regime is a simplified tax system introduced to reduce tax rates while removing most deductions and exemptions.
Earlier, taxpayers had to opt for it. Now it is applied automatically unless you choose the old regime.
It offers:
✔ Lower tax slab rates
✔ Simple tax calculation
✔ No need to maintain proof for multiple deductions
However, most deductions like 80C and 80D are not available.
🔹 Income Tax Slabs FY 2025-26 (New Tax Regime 2025)
Below are the latest Income Tax Slabs for FY 2025-26:
| Annual Income | Tax 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% |
👉 4% Health & Education Cess is extra
👉 Section 87A rebate available as per government limits
These are the updated slab rates under the New Tax Regime 2025-26.
🔹 Deductions Not Allowed in Default Tax Regime
One major difference between Old vs New Tax Regime is deductions.
Under Default Tax Regime FY 2025-26, you cannot claim:
- Section 80C (LIC, PPF, ELSS, EPF, etc.)
- Section 80D (Medical Insurance)
- HRA (House Rent Allowance)
- LTA
- Home Loan Interest (Self-Occupied Property)
- Most Chapter VI-A deductions
Allowed deductions include:
- 80CCD(2) – Employer contribution to NPS
- 80JJAA – Specific business deductions
If you invest heavily for tax saving, the old regime may reduce your tax more.
🔹 Detailed Tax Calculation Examples (FY 2025-26)
Let’s understand the Income Tax Calculation under New Tax Regime 2025 with examples.
✅ Example 1: Income ₹7,50,000
Tax Calculation:
- ₹0 – ₹4,00,000 → NIL
- ₹4,00,001 – ₹7,50,000 (₹3,50,000 × 5%) = ₹17,500
Total Tax = ₹17,500
Cess @4% = ₹700
👉 Final Tax = ₹18,200
✅ Example 2: Income ₹15,00,000
- ₹0 – ₹4,00,000 → NIL
- ₹4,00,001 – ₹8,00,000 = ₹20,000
- ₹8,00,001 – ₹12,00,000 = ₹40,000
- ₹12,00,001 – ₹15,00,000 = ₹45,000
Total Tax = ₹1,05,000
Cess @4% = ₹4,200
👉 Final Tax = ₹1,09,200
✅ Example 3: Income ₹25,00,000
Total slab-wise tax:
₹3,30,000
Cess @4% = ₹13,200
👉 Final Tax = ₹3,43,200
This example clearly shows how slab-based taxation works in the New Tax Regime FY 2025-26.
🔹 Old vs New Tax Regime – Which is Better in FY 2025-26?
Choosing between Old vs New Tax Regime 2025-26 depends on your income and investments.
Default Regime is Better If:
✔ You don’t invest much under 80C
✔ You don’t claim HRA
✔ You don’t have housing loan
✔ You prefer lower slab rates
Old Regime is Better If:
✔ You claim full 80C (₹1.5 lakh)
✔ You pay home loan interest
✔ You claim HRA
✔ You have medical insurance deduction
Always calculate tax under both regimes before filing ITR.
🔹 Frequently Asked Questions (FAQs)
1️⃣ Is new tax regime mandatory in FY 2025-26?
No. It is default, but you can choose old regime while filing ITR.
2️⃣ Can I switch between old and new regime?
Salaried individuals can switch every year. Business income cases have restrictions.
3️⃣ Is rebate under Section 87A available?
Yes, rebate is available as per income limits notified by government.
4️⃣ Are 80C and 80D allowed in new regime?
No, these deductions are not available under Default Tax Regime FY 2025-26.
🔹 Final Conclusion
The Default Tax Regime FY 2025-26 offers lower tax rates but removes most deductions. It is suitable for taxpayers who do not invest much in tax-saving instruments.
Before filing your Income Tax Return (ITR), compare both regimes carefully. The right choice can save thousands of rupees.
If you need professional help in tax planning or ITR filing, contact Your FinTax Buddy today.
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