For the financial year 2025-26, India’s Income Tax Act applies two parallel slab structures for individuals, a five-tier Goods and Services Tax on what you spend, and separate rates on capital gains. The default is the New Tax Regime, where income is taxed at seven bands running from nil up to ₹4,00,000 to 30% above ₹24,00,000, and a Section 87A rebate erases the tax entirely for taxable income up to ₹12,00,000. GST rates sit at 0%, 5%, 12%, 18%, and 28%. Long-term capital gains are taxed at 12.5%, and short-term gains on listed equity at 20%. The Constitution’s Article 265 bars any tax without a law behind it,1Constitution of India. Constitution of India Article 265 – Taxes not to be imposed save by authority of law and the specific numbers below come from the current Finance Act cycle, so they shift each year.
New Tax Regime Slabs for FY 2025-26
Since FY 2023-24, the New Tax Regime under Section 115BAC has been the default. Do nothing on your return and this is what applies. Salaried taxpayers get a standard deduction of ₹75,000 before the slabs bite. The bands for FY 2025-26 (AY 2026-27) are:2Income Tax Department. Salaried Individuals for AY 2026-27
- Up to ₹4,00,000: nil
- ₹4,00,001 to ₹8,00,000: 5%
- ₹8,00,001 to ₹12,00,000: 10%
- ₹12,00,001 to ₹16,00,000: 15%
- ₹16,00,001 to ₹20,00,000: 20%
- ₹20,00,001 to ₹24,00,000: 25%
- Above ₹24,00,000: 30%
A Section 87A rebate zeroes out the tax bill for individuals with taxable income up to ₹12 lakh, or ₹12,75,000 for salaried people once the ₹75,000 standard deduction is applied. The maximum rebate is ₹60,000, which is what the slab math produces at that threshold.
Old Tax Regime Slabs
The Old Regime is still available, and salaried filers can select it directly on the return. Those with business income have to file Form 10-IEA before the due date to opt in.3Income Tax Department. FAQs on New Tax vs Old Tax Regime The standard deduction here is ₹50,000. Slabs for individuals under 60:2Income Tax Department. Salaried Individuals for AY 2026-27
- Up to ₹2,50,000: nil
- ₹2,50,001 to ₹5,00,000: 5%
- ₹5,00,001 to ₹10,00,000: 20%
- Above ₹10,00,000: 30%
Senior citizens (60 to 79) get a ₹3,00,000 exemption limit. Super senior citizens (80 and above) pay nothing on the first ₹5,00,000. The old-regime Section 87A rebate maxes out at ₹12,500 for income up to ₹5 lakh.
Surcharge and Cess
Above ₹50 lakh of income, both regimes add a surcharge on top of the computed tax: 10% above ₹50 lakh, 15% above ₹1 crore, and 25% above ₹2 crore. Above ₹5 crore the old regime goes to 37%; the new regime caps at 25%.2Income Tax Department. Salaried Individuals for AY 2026-27 Marginal relief keeps someone who just crosses a threshold from paying more overall than the threshold itself would justify. After the surcharge, a 4% Health and Education Cess is added for every taxpayer.
Deductions That Tilt the Choice Toward the Old Regime
The reason to accept higher slab rates is deductions. If your eligible investments and expenses are large enough, they can more than offset the difference.
Section 80C allows up to ₹1,50,000 a year for items like life insurance premiums, Public Provident Fund contributions, Equity Linked Savings Schemes, home loan principal repayment, and children’s tuition fees. Section 80D covers health insurance premiums: up to ₹25,000 for cover on yourself and family, plus another ₹25,000 for parents (₹50,000 if the parents are senior citizens). When both the taxpayer and parents are over 60, the combined 80D cap reaches ₹1,00,000. A preventive health check-up of up to ₹5,000 sits inside those limits. Neither deduction is available under the New Regime.
GST Rates and Registration Thresholds
The Goods and Services Tax replaced central excise duty, service tax, and a stack of state-level indirect taxes when it launched in 2017. It is destination-based: the revenue accrues to the state where the goods or services are consumed. Within a state, tax splits equally into Central GST and State GST. Interstate sales carry Integrated GST instead.
Rates fall into five tiers: 0%, 5%, 12%, 18%, and 28%.4Ministry of Food Processing Industries. Product Wise GST Rates of Food Products Unprocessed food grains and fresh produce sit at 0% or 5%. Most goods and services land at 12% or 18%. Luxury items, tobacco, and certain other goods draw the 28% top rate and may carry additional compensation cesses on top.
Registration is mandatory when annual turnover crosses ₹40 lakh for goods (₹20 lakh in special category states) or ₹20 lakh for services (₹10 lakh in special category states). Below those thresholds, registration is optional, and businesses that don’t register cannot claim Input Tax Credit. That credit — subtracting GST paid on inputs from GST collected on sales — is the mechanism that keeps the tax from cascading at each stage.
The Composition Scheme
Small businesses that stay within prescribed turnover limits can opt into a simplified composition scheme.5Central Board of Indirect Taxes and Customs. Frequently Asked Questions on Composition Levy Manufacturers pay 2% on turnover (1% CGST plus 1% SGST), traders 1%, and restaurants 5%. In exchange, composition dealers cannot collect GST from buyers, cannot claim Input Tax Credit, and cannot make interstate sales.
Capital Gains: Rates by Asset and Holding Period
Selling property, shares, mutual fund units, or gold at a profit triggers capital gains tax, and the rate turns on how long you held the asset.6Income Tax Department. Capital Gain
Long-Term Capital Gains
For transfers on or after July 23, 2024, long-term capital gains are taxed at 12.5% without indexation. Listed equity shares and equity-oriented mutual fund units get an annual exemption of ₹1,25,000; anything above that is taxed at 12.5%. Resident individuals and Hindu Undivided Families who acquired land or buildings before July 23, 2024 can instead opt for a 20% rate with indexation if it produces a lower liability.6Income Tax Department. Capital Gain
Short-Term Capital Gains
Short-term gains on listed equity shares and equity mutual fund units are taxed at a flat 20%. For other assets, short-term gains get added to your ordinary income and taxed at your applicable slab rate. Gains from depreciable business assets are always treated as short-term regardless of the actual holding period.6Income Tax Department. Capital Gain
Reinvestment Exemptions
Section 54 exempts long-term gains from sale of a residential property if you buy or construct another residential house within the prescribed windows: one year before the sale, two years after for a purchase, or three years after for construction. The exemption caps at ₹10 crore. If reinvestment isn’t done before the return due date, the funds can be parked in a Capital Gains Account Scheme with a designated bank to preserve the benefit. Section 54EC offers an alternative: invest up to ₹50 lakh per financial year in specified capital gains bonds (issued by bodies like REC or NHAI) within six months of sale of land or a building. The bonds lock in for five years. Selling the new property or redeeming the bonds early revives the original tax liability.
Corporate Income Tax
Domestic companies are taxed on worldwide income. The standard rate is 30%, but companies that opt into the Section 115BAA concessional regime pay 22% and give up most exemptions and deductions.7Income Tax Department. Domestic Company for AY 2026-27 Foreign companies pay 35% on income earned in India. The 4% Health and Education Cess applies to every corporate taxpayer on top of the base tax and any surcharge. Companies with income above ₹1 crore also face surcharges that scale up at higher profit levels.
Where a company’s regular tax works out to less than 15% of its book profit, it pays Minimum Alternate Tax at 15% of book profits instead. Companies that elected the 22% rate under Section 115BAA, or the manufacturing rate under Section 115BAB, are outside MAT altogether.7Income Tax Department. Domestic Company for AY 2026-27
Who These Slabs Actually Apply To
These slabs and rates run on Indian tax residency, not citizenship. Section 6 of the Income Tax Act sorts you as Resident and Ordinarily Resident, Resident but Not Ordinarily Resident, or Non-Resident.8Indian Kanoon. The Income Tax Act, 1961 – Residence in India You are a resident if you spend 182 days or more in India in the financial year, or if you spend at least 60 days in the current year and have accumulated 365 days or more across the four preceding years. Indian citizens visiting India, and Indian citizens who left for employment abroad or as crew members, get the 60-day threshold relaxed to 182 days, though that relaxation drops to 120 days if Indian-source income crosses ₹15 lakh.9Income Tax Department. Non-Resident Individual for AY 2026-2027 ROR individuals are taxed on worldwide income. RNOR and NR individuals are taxed only on income sourced in India.
TDS, Advance Tax, and What You Actually Pay
India collects much of its income tax before the money reaches you. Payers withhold Tax Deducted at Source and deposit it with the government. Key TDS rates for FY 2025-26:10Income Tax Department. TDS Rates
- Salary (Section 192): at your applicable slab rate
- Interest on bank deposits (Section 194A): 10%
- Rent on land or buildings (Section 194-I): 10%
- Professional fees (Section 194J): 10%; technical services: 2%
- Rent on plant and machinery (Section 194-I): 2%
TDS withheld across the year shows up as a credit against your final tax when you file. Over-withheld amounts come back as a refund; shortfalls have to be paid.
If your estimated tax liability for the year exceeds ₹10,000 after subtracting TDS, advance tax is due in quarterly installments: 15% by June 15, 45% by September 15, 75% by December 15, and 100% by March 15.11Comptroller and Auditor General of India. Report No. 11 of 2020 (Direct Taxes) – Chapter V: Interest under sections 234A, 234B, 234C, and 244A of the Act Senior citizens without business income are exempt from advance tax. Missing an installment attracts interest at 1% per month on the shortfall under Sections 234B and 234C. Filing the return late brings a Section 234F fee of ₹5,000 for income above ₹5 lakh, capped at ₹1,000 if income is ₹5 lakh or less; you also lose the ability to carry forward certain losses.