Income Tax changes in FY26: 5 numbers you should know

Summary:The last financial year (FY25-26) brought a slew of changes to India’s taxation system. From tax exemptions to an increase in the standard deduction, here are five key changes and how they will impact you.

Income tax changes often get reduced to one big headline number. But the real impact lies in the fine print, the thresholds, the slabs, and the small shifts that change what you actually pay.

For FY 2025-26, the new tax regime has become meaningfully more attractive for a large set of taxpayers. At the same time, the old regime still holds ground for those who claim sizeable deductions.

Here are five numbers that matter most this year, and what they mean for your tax planning.

1) Rs 12 lakh: The new regime’s no-tax sweet spot

The most important headline is this: under the new tax regime, if your taxable income is up to Rs 12 lakh, your tax payable becomes zero after the Section 87A rebate.

This isn’t a slab change. It is a rebate-driven reset. And for many middle-income taxpayers, it changes the starting point of tax planning altogether.

For salaried individuals, the benefit stretches further. The new regime allows a standard deduction of Rs 75,000, which means the effective no-tax zone reaches roughly Rs 12.75 lakh of gross salary, assuming no other adjustments.

The message is clear: the new regime is no longer just ‘simpler’. For many, it is now materially cheaper, but only if you are not relying heavily on deductions.

2) 0 to 30 per cent: Slabs that look friendlier than they feel

The revised slabs under the new regime for FY 2025-26 are:

• 0 per cent up to Rs 4 lakh
• 5 per cent from Rs 4 lakh to Rs 8 lakh
• 10 per cent from Rs 8 lakh to Rs 12 lakh
• 15 per cent from Rs 12 lakh to Rs 16 lakh
• 20 per cent from Rs 16 lakh to Rs 20 lakh
• 25 per cent from Rs 20 lakh to Rs 24 lakh
• 30 per cent above Rs 24 lakh

The structure is smoother, with wider income bands. That reduces the sudden jump many taxpayers feel when crossing a slab threshold.

But the real point is practical: tax applies only to the income within each slab.

So if your income rises from Rs 11 lakh to Rs 13 lakh, you don’t suddenly pay 15 per cent on the full Rs 13 lakh. Only the portion above Rs 12 lakh is taxed at the higher rate.

This is basic, but it remains one of the most common misunderstandings in tax conversations.

3) Rs 75,000: The deduction the new regime quietly kept

The new regime was originally positioned as a trade-off: fewer deductions in exchange for lower rates and simpler filing.

That line has blurred.

For FY 2025-26, salaried taxpayers can claim a standard deduction of Rs 75,000 even under the new regime. This directly reduces taxable income.

That is why the Rs 12 lakh rebate threshold matters so much. A gross salary of Rs 12.75 lakh can still translate into taxable income of Rs 12 lakh after the deduction, making your tax payable zero.

So the new regime is no longer ‘no deductions’. It is ‘few deductions, but one that matters’.

4) 50 per cent: A draft HRA shift that could revive the old regime

House Rent Allowance (HRA) remains one of the strongest advantages of the old regime. If you pay rent, the exemption can significantly reduce taxable income.

A key limit in the HRA formula is:

• 50 per cent of salary for metro cities
• 40 per cent of salary for non-metro cities

Draft rules aligned with the upcoming Income Tax Act propose expanding the list of cities eligible for the 50 per cent limit beyond the four metros.

This is still in draft form, not something you can build your FY 2025-26 tax plan around. But it is a signal worth tracking.

Because the old regime’s survival depends on whether deductions remain large enough to justify the extra complexity. HRA is one of the few that can still tilt the decision decisively.

5) April 1, 2026: The date most taxpayers overlook

The new Income Tax Act is scheduled to take effect from April 1, 2026.

That means FY 2025-26 will still run under the current law, with the revised slabs and rebate rules.

The new Act is expected to simplify language and reduce interpretational clutter over time. But it will not change your tax bill this year.

Treat April 1, 2026 as a marker, not a reason for panic. Watch official notifications. Ignore the noise.

What you should do now

Most taxpayers ask the wrong question: “Which regime is better?”

The better question is: “Which regime is better for me, based on what I actually claim?”

A simple framework makes the decision straightforward:

• Compute taxable income after the standard deduction
• Calculate tax under the new regime
• Calculate tax under the old regime after deductions such as 80C, HRA and home-loan interest
• Compare the final tax payable

Do this once, and you won’t need to rely on generalised advice.

To know how much income tax you are liable to pay, check out Value Research’s Tax Calculator.

The bottom line

For FY 2025-26, the new regime is no longer just the simpler option. For many salaried taxpayers, it is also the cheaper one.

But the old regime still has one job: reward taxpayers with large deductions. If you pay high rent, invest meaningfully under Section 80C, or service a home loan, it may still come out ahead.

Income tax, like investing, isn’t about reacting to headlines. It is about arithmetic, repeated every year.

And in personal finance, arithmetic is often the most underrated edge.

To get more such in-depth insights, keep reading Value Research.

Also read: Budget and You: Revised tax slabs, more tax saving