The Union Budget 2025 has introduced a significant shift in India’s tax landscape, specifically targeting middle-income earners by making the New Tax Regime much more attractive. By prioritizing higher basic exemptions and lower slab rates over traditional deductions, the government has created a path for substantial yearly savings.
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📊 FY 2025-26 Tax Slabs: New Regime Breakdown
Under the New Tax Regime for the financial year 2025-26, the tax structure has been simplified into the following brackets:
| Income Range (₹) | 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% |
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Note: Due to an increased rebate under Section 87A (up to ₹60,000), individuals with a net taxable income of up to ₹12 lakh effectively pay zero tax. For salaried employees, adding the ₹75,000 standard deduction pushes this “zero-tax” limit to ₹12.75 lakh.
💰 The “₹20 Lakh Earner” Case Study
For a salaried individual earning ₹20 lakh per annum, the shift to the new regime offers a direct boost to take-home pay.
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New Regime Tax (FY 2025-26): Approximately ₹1,92,400.
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Old Regime Tax: Approximately ₹3,02,016 (assuming basic deductions).
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Annual Savings: Over ₹1.1 lakh.
This massive saving is possible because the 30% tax rate—which previously kicked in at ₹15 lakh—now only applies to income exceeding ₹24 lakh.
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🔮 Looking Ahead: Budget 2026 Expectations
As we approach the Union Budget 2026 (expected February 1, 2026), the focus is shifting from “tax cuts” to “simplification and certainty.” Key expectations from tax experts and the public include:
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Standard Deduction Hike: Hopes to increase the limit from ₹75,000 to ₹1,00,000.
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30% Slab Revision: Anticipation that the highest tax bracket might be pushed further to ₹35 lakh or ₹40 lakh to account for urban inflation.
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Unified TDS Framework: A push to streamline the complex web of TDS rates (on rent, interest, etc.) into two or three standardized rates.
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Health Insurance Relief: Potential new deductions for medical insurance premiums specifically within the New Tax Regime.
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