Wondering how the new budget affects your taxes? This guide on Income Tax in India for FY 20252026 covers everything from tax slabs to deductions and exemptions. Find out how you can save more while filing your taxes.

Income Tax in India: A Comprehensive Guide to Understanding Tax Slabs and Deductions (FY 20252026)

The Union Budget 2025 has brought several key changes to India's income tax system, impacting taxpayers across various categories, including salaried employees, business owners, freelancers, and investors. These changes aim to simplify tax compliance, provide relief to middle-class taxpayers, and encourage investments in key sectors.

Understanding the revised tax slabs, deductions, and exemptions is crucial for individuals and businesses to effectively plan their taxes and maximize savings. The budget has also introduced new tax benefits, adjustments to existing deductions, and updates in tax filing regulations, ensuring that taxpayers can make informed financial decisions.

This comprehensive guide will cover:

Latest Income Tax Slabs under the New and Old Tax Regimes for FY 2025-26.

• Key deductions available under Section 80C, allow taxpayers to reduce their taxable income by investing in government-backed schemes and financial instruments.
• Tax exemptions such as House Rent Allowance (HRA), Standard Deduction, and Home Loan Benefits, which can significantly lower tax liability.
• Important tax filing deadlines and procedures to ensure compliance and avoid penalties.
• Recent changes announced in Budget 2025, including increases in standard deduction limits, rationalization of capital gains tax, and digital tax compliance improvements.

By understanding these tax regulations, taxpayers can strategically plan their finances, choose the most beneficial tax regime, and take advantage of available exemptions and deductions. Whether you are filing your income tax return for the first time or looking to optimize your tax outgo, this guide will help you navigate India's evolving tax system efficiently.

1.  Understanding Income Tax in India

Income tax in India is levied based on an individual's taxable income as per the Income Tax Act, of 1961. The government collects income tax to fund public services and infrastructure development.

Taxes are calculated under two regimes:

1. Old Tax Regime – Includes various deductions and exemptions.
2. New Tax Regime – Introduced in Budget 2020, offering lower tax rates but without deductions.

For FY 2025-26, the government has made key changes to both tax regimes, which we will discuss below.

2.  Latest Income Tax Slabs for FY 2025-26

New Tax Regime (Default Regime)

The new tax regime is now the default option unless an individual opts for the old regime. Here are the revised tax slabs for FY 2025-26:

Standard Deduction of ₹50,000 is now available under the new regime.

Old Tax Regime (With Deductions & Exemptions)

If you prefer to claim deductions, you can still opt for the old tax regime, which follows these slabs:

Rebate under Section 87A:

• Individuals with taxable income up to ₹7,00,000 (New Regime) or ₹5,00,000 (Old Regime) get a rebate, making their tax liability zero.

3.  Key Income Tax Deductions & Exemptions

If you choose the old tax regime, you can claim various deductions under different sections of the Income Tax Act.

Section 80C – Maximum Deduction of ₹1.5 Lakh

One of the most popular deductions, Section 80C allows individuals to reduce taxable income by investing in:

• Employee Provident Fund (EPF)
• Public Provident Fund (PPF)
• Life Insurance Premiums
• Tax-Saving Fixed Deposits
• National Savings Certificate (NSC)
• ELSS Mutual Funds

Section 80D – Health Insurance Premium Deduction

• Individuals can claim up to ₹25,000 for themselves, their spouse, and their children.
• If parents (aged 60+) are covered, an additional ₹50,000 can be claimed.
• Total deduction: ₹75,000 if parents are senior citizens.

Section 24(b) – Home Loan Interest Deduction

• Home loan interest deduction of up to ₹2 lakh per year on self-occupied property.
• No limit on interest deduction for rented properties.

House Rent Allowance (HRA) – Tax Exemption

Salaried employees receiving HRA as part of their salary can claim a tax exemption on rent paid, subject to conditions.

Section 80E – Education Loan Deduction

• Interest paid on education loans is fully deductible for up to 8 years.

4.  Important Income Tax Filing Deadlines for FY 2025-26

• July 31, 2025 – Last date to file Income Tax Returns (ITR) for individuals.
• October 31, 2025 – Last date for taxpayers requiring an audit.
• December 31, 2025 – Last date to file a belated return.

5.  New Tax Benefits & Provisions in Budget 2025

• Increase in standard deduction under the new tax regime.
• Higher tax rebate limit (₹7,00,000) under Section 87A.
• Rationalization of capital gains tax on investments.
• Boost in digital tax compliance and faster refund processing.

6.  How to File Income Tax Returns (ITR) Online?

1. Login to the Income Tax e-Filing Portal (https://www.incometax.gov.in).
2. Select the correct ITR form based on your income source.
3. Provide necessary details like salary, deductions, and tax payments.
4. Verify and submit your return using Aadhaar OTP or net banking.
5. Check the ITR status and wait for the refund, if applicable.

7.  Common Mistakes to Avoid While Filing ITR

• Incorrect Income Declaration – Always cross-check salary slips, Form 16, and bank statements.
• Missing Deductions & Exemptions – Ensure you claim deductions under Sections 80C, 80D, and HRA if applicable.
• Not Verifying ITR – ITR filing is incomplete unless verified within 30 days of submission.

8.  Tips to Save More on Taxes in 2025

• Opt for Tax-Free Investments – Invest in PPF, NPS, and tax-free bonds to reduce taxable income.
• Maximize Deductions – Utilize the full ₹1.5 lakh limit under Section 80C and health insurance deductions.
• Use HUF or Joint Home Loans – Hindu Undivided Family (HUF) accounts and joint home loans can offer additional tax benefits.

Final Thoughts

For expert guidance on tax planning or to gain deeper insights into the above topic, you can contact Pratik S Kothari.